FOREIGN INVESTMENT IN NIGERIA UNDER STRUCTURAL ADJUSTMENT PROGRAMME (SAP).

FOREIGN INVESTMENT IN NIGERIA UNDER STRUCTURAL ADJUSTMENT PROGRAMME (SAP).

Chapter One

Introduction 

According to the Central Bank of Nigeria’s annual report, the Nigerian economy performed less successfully in the 1980s than in the 1970s. The oil sector’s performance accounted for a significant portion of the rise in both times. By 1970, oil output had reached 558 million barrels, rising to 823 million barrels by 1973.

Between 1975 and 1985, oil production per day averaged between 1.8 and 2.3 million barrels. With the huge spike in oil prices in 1973 and 1974, oil accounted for 31.9% of real GDP growth and has continued to dominate economic performance in the Niger sector.

Although the policy’s goal was to convert oil revenue into directly productive structures and boost long-term development possibilities, the imperatives and political pressure to spend resulted in consolable waste and an oil boom in construction activities.

The oil price increase, together with the rise in the currency rate, provided negative protection to agriculture and reduced its importance in the economy from approximately 40% of GDP in the early 1970s to 1980s.

Accordingly, food imports increased dramatically from 200,000 lorus in the 1960s to 399,000 tones in 1974, peaking at 2,441,000 lorus in 1981. By 1985, most industries’ capacity utilisation was less than 20% due to a lack of foreign exchange, raw supplies, and spare parts.

Inflation has also reached unacceptable levels. When the previous administration in Nigeria (the Babangida Administration) took office in August 1985, it took a critical look at the magnitude of the country’s economic problems and, in July 1986, adopted a program known as the Structural Adjustment Programme (SAP) as a means of addressing these issues.

This entailed, among other things, diversifying the economy in order to make it more resilient to external factors. In September 1986, the import licensing system was abolished, and the inter-bank foreign exchange system was implemented to ensure that the naira had a realistic exchange rate.

Commodities exported were eliminated, and major government subsidies, such as telecommunications and electricity, were either removed or increased through commercialisation and privatisation.

In general, market forces were used to allocate resources rather than administrative controls. Public investments in government-owned firms were largely reduced, and in certain cases, they were completely privatised. Except in certain key industries, such as petroleum liquefied natural gas (LMG) and petrol chemicals.

The government has instead decided to focus on the development and improvement of basic infrastructure such as roads, water supply, telecommunications, and electricity.

The overarching purpose of the economic adjustment is to allocate resources efficiently and return the economy to its former grandeur. It aims to shift rescues from the public sector to the private sector, allowing this sector to become more productive and thus the economic foundation of Nigeria’s economy (Ayaji, 2010).

Foreign investments are those owned by individuals and corporations from countries other than the host. The structural adjustment program is a set of policies implemented with the goal of revitalising an ailing economy.

The most important part of the structural adjustment strategy in terms of foreign investment is the deregulation of the currency rate and the liberalisation of the process for registering foreign businesses in Nigeria.

Although the exchange control act was passed in 1962, it was widely enforced until the civil war broke out in 1967.

According to the 1968 Act, foreign investors must obtain both a business permission and a permit to employ foreigners. The Enterprise Promotion Decrease of 1977 prohibited foreigners’ equity participation in local firms based on their schedule or category.

However, with the implementation of the Structural Adjustment Programme, the majority of the regulations were lifted. Foreign investors might seek and acquire licenses coordination committee (IDCC), bring in funds, and repatriate earnings without any restrictions.