IMF's Structural Adjustment Program Reform for Nigeria

IMF & NIGERIA
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IMF & Nigeria
Structural Adjustment Programs (SAPs) are economic reforms that countries in economic crisis must adhere to as a condition for receiving a loan from the International Monetary Fund (IMF) and the World Bank (WB). SAPs are generally geared towards adjusting the borrowing country’s economic structure and reducing its government deficit by eliminating inflation, encouraging economic growth, and liberalizing trade and foreign investment. The IMF and World Bank have long imposed SAPs as conditions on their loans or reduction of interest rates on existing loans (World Bank, 1994). Counties are generally required to perform all or some of the following: devalue their currencies to lower government deficits, reduce public spending, privatize state-controlled industries, improve domestic tax collection, and implement favorable policies to attract foreign investment. SAPs have attracted a lot of controversy in developing nations, which have largely failed to benefit from the imposed economic reforms.
Although SAPs are intended to lower poverty, reduce balance of payments deficits, and increase economic growth, a majority of low-income countries have failed to record meaningful economic growth or strengthen their balance of payments. For instance, most African countries that received the conditional loans from IMF and World Bank in the 1980s experienced a contractive economic impact that persists to this day (Business Perspectives, 2014). While issues like corruption, ownership of resources, and political interests have undermined the efficacy of SAPs in developing nations, most of the structural adjustments demanded by international financial agencies as a condition for new loans stifle long-term economic growth by restricting public investment and transferring resources to richer nations. This research will investigate the impact of IMF’s SAP on Nigeria’s economic growth after the 1986 international oil price collapse. The essay theorizes that the SAP conditions imposed by the IMF in 1986 including devaluation of the naira, commercialization and privatization of state-controlled industries, deregulation of interest rate, and removal of subsidies resulted in the stagflation of Nigeria’s economy.
Nigeria’s oil boom of the 1970s had a widespread impact on the country’s economy. The revenues generated from oil exports provided the funds required to develop the country’s infrastructure. The country’s oil revenues also helped expand other sectors of the economy such as health and education, which had been greatly undermined by the civil war of 1967 to 1970. However, despite the successes in developing numerous social services, many public investment projects were implemented without considering their long-term sustainability. Many of the public agencies tasked with implementing Nigeria’s public investment projects lacked sufficient capacity to make them economically viable. Moreover, the rapid expansion of social services was accompanied by an increase in public expenditure on wages. Non-oil tr...