CHAPTER ONE

CONCEPTUALIZATION OF ECONOMIC POLICY AND THE NIGERIA SITUATION

1.0  INTRODUCTION 

Policy means a plan action agreed or chosen by government, a business or organization. It is a principle of behavior or belief that influences how one behave. It can also be defined as government programmes of action, which is what government intend to do and how they intend to do or achieve it.1

Economic policy can be seen as a set of Economic measures conceptualized formulated, enacted and executed by government as a deliberate effort to speed up the process of Economic development in such society. It is the deliberate measures or programs taken by governments or their agents an order to accelerate the pace of development for the socio-Economic well-being of its citizenry. No country whether big or small, would leave its economy to invisible hand of market forces without any kind of moderation. It has been argued by some scholars in the economic field that in modern world, no country’s economic and social development are free from some form of deliberate efforts by government or its agent, to speed up the process of economic development.

Government plays a vigorous role in shaping, designing and moderating economic developments in each of their respective states or countries. While in some states, the role of the governments is pervasive, directly, and extensively interfering with the lives of the people- as typical of socialist or communist oriented countries, in others that are capitalist oriented the influence of governments is limited to policy measures with which economic and others actions take lace and this provide the stimulus to economic growth and development.

One of the most important purpose or programs of a constituted government is the formulation of economic policy. The relevance of the formulation of such economic policy in the act of governance cannot be over emphasized considering the implication of a weak economy for the survival of a nation:- The strength of a nation rests on a viable economy. A nation with a viable economy enjoys political stability, high standard of living for its citizenry and a good diplomatic relation with other nations of the world. Therefore it can be safe for us to argue that the economic strength of a nation is a major determinant of the political power of that nation and its respectability in the international system or environment. In order to pursue economic statecraft effectively, states and indeed governments need to have a strong economic base. Such financial strength is usually an important element in the power equation of states in the international system.

The growth rate of the economy, the inflation rate, the international/foreign reserves (holding of foreign currency and gold), the balance of payment, budget surplus or deficit of the central bank of states, are crucial factors in determining the performance of states in the international environment.

For instance, according to IMF and World Bank sources (1996), Japan had a moderate growth rate and low inflation. Her international reserve was substantial. She had a positive balance of payment and a small deficit. Russia by contrast, was in financial shambles, her GDP had declined and inflation had run rampant; it had scant international reserves and a substantial balance of payment deficit. Given this scenario, Japan though smaller by size is more likely to play a more dominant role in the international political economy than Russia. Similarly, with the 1994 GDP of 6.6 trillion dollar, the U.S.A is an economic titan that could use its economic power to produce other types of relationship. The U.S has the ability, for instance to influence other countries by offering trade benefits or threatening trade sanctions. For this reason, the U.S. has continue to play a dominant and vigorous role in international economic relations and in world politics. Since every nation strives to achieve those goals; economic policy becomes an important economic tool used in promoting economic growth.

The success of a government is not only determined by its political actions or position but most importantly, how such government manages the economy. The economy of a nation has profound effect on the social, political and economic life of her citizens. When and if poorly managed, the result is that the government losses credibility amongst its citizens. Formulation and implementation of economic policy becomes a sensitive issue in governance which has to be exercised with a high level of seriousness in that, it determine how successful a government is formulation of economic policy is not new in Nigeria, as virtually every regimes come with one form of policy or the other. However, this work is limited or concerned with economic policies initiated by the military governments in Nigeria between 1983-1993 when the military terminated the second republic and took over the leadership of this nation-Nigeria.

Post independent Nigeria have had a chequered history – this is because it has been characterized by political instability occasioned by incessant military interventions into the nations political scene. Of the over 50 years of Nigeria’s independence, the military has made six (6) successful interventions into the Nigeria government; 1966-1975, Gen. Gowon led government; 1975-1979, Gen. Murtala/Obasanjo led government; 1983-1985; Buhari/Idiagbon, led military government; 1985-1993, Gen Banbagida led military government, 1993-1998, Abacha led the military government till his death and 1998-1999 Gen. Abdulsalami led the military government and handed over power on May 29th 1999 to a democratically elected president and commander-in-chief of the Nigeria arm forces.

It will therefore be ideal to ascribe most of the economic policy(ies) formulated and implemented in Nigeria to military regimes which have had a greater share in governance since independence and these policies have had its effect on the economy. Such effect had profound impact on the social, political and economic life of Nigeria. The most pronounced of these economic policies was the one initiated in 1986 by the military government led by Gen. Banbagida.

The period between 1985-1993 when Banbagida ruled this nation, marked a revolutionary change in Nigeria’s history. Revolution in history may be dramatic or traumatic. It may also be violent resulting in bloodletting as in the case of the French Revolution of 1789. Revolution could also occur or be made to occur through a systematic Activation of particular decisions, policies and progress by a leader6. The Banbagida administration initiated a lot of decisions, policies and programs that were unique in the life of the nation. Most important was his economic policy known as the Structural Adjustment program (SAP).

The Banbagida military government economic package-SAP was not entirely new in Nigeria but it was formally introduced or applied in Nigeria’s economy in 1980’s. This was after a series of disagreement between previous government and the international monetary fund (IMF) which led to a deadlock over the issue of Nigeria receiving loan from IMF. SAP is a World Bank and IMF program conditionally for countries that are faced with serious deficit in the balance of payment. Therefore, the ultimate reason why SAP was introduced in Nigeria economy was to correct imbalance that has been manifesting in the Nigeria economy since the early 1980’s. It was hoped that SAP would place the Nations economic development on a realistic course and correct the wrong headed import substitution program of the late 1950’s through to the beginning of the 1980’s.

Nigeria economy for instance, has been characterized by a rather dismal growth performance over the past several years before 1986 when SAP was introduced. The economy also suffered from structural imbalance which was dominated by oil sector which provides the bulk of foreign exchange and government revenue. During the period of the oil boom, the country’s per capital income rose significantly, peaking at about N1,160 in the late 70’s and early 80’s. Decline started manifesting in the per-capital income in the middle 1980’s as a result of the fall in oil price in the international market. The situation led to a serious economic crisis which began in 1982 has the country was faced with a serious balance of payment deficit. The Shagari regime, 1979 to 1983, under which the crisis manifested itself tried to resolve it through a combination of state regulations as exemplified in the introduction or austerity measures. And some structural adjustment measures. The regime in April 1983, applied for an I.M.F. support loan to argument the balance of payment and by the end of the year it had started making moves to secure a world Bank structural adjustment loan. But there was disagreement over the I.M.F. request that the economy should be deregulated by granting ascendency to market forces and the substantial devaluation of the naira.

Furthermore, the Buhari regime which overthrew Shagari’s administration on December 31st 1983, believed that the crisis could be resolved through state regulation and implementation of a structural adjustment program. The regime then embarked on measures like retrenchment and anti-corruption crusade, counter trade and the promotion of a greater state control of the economy. At the same time, the administration stated its commitment to a structural adjustment program with a keynote address given by Gen. Buhari at a conference on strategies for the 5th National Development Plan (NDP) at the Nigeria institute for social and economic research (NISER) Ibadan on 26th November, 1984. He stated that:

Because of the structural adjustment required to place the economy on the part to early discovery and a self sustained growth, the present administration has decided against any extension of the life of the 4th plan.

Nevertheless, the disagreement between the Shagari and the Buhari regime on the one hand and the I.M.F. on the other hand, resulted as a stalement of Nigeria’s request for the balance of payment support loan.

The Babangida regime which overthrown the Buhari’s administration in August, 1985, made it clear that it was bent on resolving the imposes between the Nigeria’s government and the I.M.F. After the rejection of the I.M.F. loan through a public debate in 1985, the regime want ahead to introduce structural adjustment program- SAP in June 1986. The Babangida administration was throughout its life, committed to the fall scale implementation of the program.

Conclusively, the introduction and implementation of SAP in Nigeria, marked a revolutionary and a traumatic change with serious social economic and political problems which has left Nigeria unstable since 1986. SAP led to an unpresented increase in the inflationary rate in Nigeria following the deregulation of the foreign exchange market in March, 1992. Given the dependent nature of the county’s production structures, this situation simply helped to further deepen the economic crises. The big question for our consideration is: why was SAP introduced at all in Nigeria? is the policy alien, strange and impossible to fit into our social political and economic settings was SAP badly implemented by the military government. A total evaluation of the concept of the policy and its implementation would give answers to these question.