Macro - Economic Issues of Sap in Nigeria:

Introduction

The economic policy orientation during the 1970s left the country ill prepared for the eventual collapse of oil prices in the first half of the 1980s. The collapse of world oil prices and the sharp decline in petroleum output, the latter resulting from a lowering of Nigeria’s OPEC quota in the early 1980s brought to the forefront the precarious nature of the country’s economic and financial positions.

Rising and ill – directed government spending during the 1970s, neglect of the agricultural sector and inward – looking industrial policies left Nigeria vulnerable to profound changes in the external environment in the following decade. Thus, the dramatic fall in oil export revenues entailed a sharp deterioration in the country’s public finances and balance of payments. This led to recession and economic deterioration as manifested by fiscal crisis, foreign exchange shortage, balance of payments and debt crisis, high rate of unemployment, negative economic growth to mention a few.

To reverse the worsening economic fortunes in terms of declining growth, increasing unemployment, galloping inflation, high incidence of poverty, worsening balance of payment conditions, debilitating debt burden and increasing unsustainable fiscal deficits, among others, government embarked on austerity measures in 1982. It later became clear to Nigeria’s policy makers that the short-run stabilization measures and increased regulation were not appropriate responses to deep-seated impediments to growth. It was clear that there was the need to adjust to the structural imbalances and external shocks.

The government was left with three policy options:

1) Maintain the status quo i.e. a continuation of the austerity measure without structural adjustment reforms

2) Accept IMF Structural Adjustment Facility including its conditions.

3) Reject the IMF loan proposal but adopt a modified variant of the traditional Structural Adjustment package designed and implemented by...