CHAPTER ONE
INTRODUCTTON
1.1 BACKGROUND TO THE STUDY
In the early years of the 1970’s Nigeria was a washed with huge amount of wealth. The war in the Middle East affected the production and exportation of oil from the Gulf Region. In international market quantity of oil for sale was in short supply. The price of oil, consequently rose and astronomically too. Between 1973 and 1974, a barrel of Nigeria’s oil was sold for US$40. The volume of oil exported also’ rose from 558 million barrels in 1972 to 823 million barrels in 1973. Nigeria began to swim in a windfall of wealth. Because of the unexpectedness of such windfall, no serious programme was on the Nation’s drawing board for the utilization of the wealth. The economic Managers of the day .failed to midwife sound economic proqammes .- for the Nation. The euphoria was such that the Mead of State at that time, General Gowon was quoted saying that the problem of the nation was not money but where to spend the money. The money was squandered in grandiose projects and festivals such as FESTAC and Scout Jamboree that have little economic benefit to the Nation. Illusionary, it was the thinking of some people that since the Nation has ocean of oil underneath her soil, the boom will be ad infitium . All the economic. Tar & and exchange controls were overturned. The shores and borders of Nigeria were thrown open to all corners of all shades. The Nation become dumping ground for foreign goods of any quality, especially, the inferior ones. The craze was for buying and selling and the atmosphere did not encourage manufacturing. Industries had to close down and those that remained open were producing at much less than their installed capacity. No product of oil was produced. production and exportation of palm produce, groundnuts, cocoa and cotton. Farming was dumped by both old and young for trading which promised quick wealth. The young people had to leave the villages where farming was done for the cities in search of oil money. The palm trees in various plantations were overgrown by weeds while the cocoa and cotton were unharvested. The abakaliki rice farmer was left with his products unsold while the Uncle Ben’s rice, imported from the United States of America, found itself in the kitchens of many Nigerians. While the palm fruits were left for the birds, the Nation was crazy with bleached palm oil imported from Malaya. It is history that Malaya came to Nigeria and collected palm fruits and seedlings which she cultivated in her country. It was the same country that have to sell the palm oil, now processed to Nigeria. What an irony! As more and more goods were imported to quench the foreign goods appetite of the nation, and no exportation except Tor oil, the foreign Reserve of the Nation, quickly depleted. Gross Domestic Product continued to decline at a fast rate. Inflation rate rose. Foreign reserve which as at 1981 was US $2.4 billion came down to US $798.5 million in 1983. The Exchange Control Measure had failed the Nation. They aggravated the economic woes of the Nation. The economy was collapsing. Something had to be done and done quickly too. Two major alternatives were before the Nation. One was to borrow the sum of US $2.8 billion from the International Monetary Fund (IMF) or . to adopt a Structural Adjustment Programme (SAP) to be midwived by I.M.F. The President of the day, General Ibrahim Babangida throws the option for national debates i.e. to borrow the sum of US $2.8 billion from the I.M.F. or to adopt the Structural Adjustment Programme. Series of Seminars and Conferences were held at different centers in the country. Print and electronic media were not left out as vehicles for the debate. The debate that was supposed to be a technical one i.e. for who have no business with economic discipline became the most loquacious. In the end, the loan was dropped in place of Structural Adjustment Programme. On 27 June 1986, the President, General Ibrahim Babangida, announced the decision of the Government to introduce the Second-Tier Foreign Exchange Market (SFEM). The main objectives of the market were: