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Ec104 study notes: African reform
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Revision notes with content from lectures and seminars for EC104 topic 16 African reform
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African reform: 1979-2001The Nigerian economy: 1979-1999
The 2nd oil cycle
● Falola and Heaton (2008) - democracy restored in 1979 and the election was
won by Alhaji Shehu Shagari
○ This 2nd Republic was corrupt and resented
○ Removed in a military coup after rigging the elections in 1983
● Beva, Collier and Gunning (1999) - oil prices peaked in 1980 and collapsed
1985-6
○ Nigeria’s debt service became unsustainable
○ More capital was leaving the country (debt servicing) than arriving
(loans / FDI)
● Per capita expenditure decreased by 44% - borne by the public spending
○ Achieved by running down assets
○ Consumption fell by ¼ and investment fell by over 50%
● Govt of General Muhammadu Buhari (-1985) had modest recovery, higher
private consumption and falling govt consumption
Structural adjustment
● Falola and Heaton (2009) - Major Babangida overthrew Buhari in a coup
(1985) due to Buhari’s inability to bring the economy under control or
reschedule debt
● He declined a loan from the IMF for a structural readjustment package
○ Had tariff rationalisation and devaluation
■ Debt service fell from 39-30% of fed revenues
■ Devaluation caused inflation (up to 70%)
○ Govt departments cut staff and reduced salaries
■ Uneven manufacturing performance depending on whether the
sector lost protection (automobiles) or kept it (textiles)
● Govt lost control of spending when oil prices spiked (in the 1st Gulf War)
○ Deficit reached 10% of GDP
The Abacha Regime and Corruption
● Falola and Heaton (2008) - 1993 elections won by Chief Abiola but annulled
by Babangida - caused unrest after which General Abacha takes power
● Suspended structural adjustment
○ Foreign relations (US/UK) deteriorate
○ Reintroduces the programme in 1995
, ● Banned political parties and imprisoned opponents (Obasanjo imprisoned in
1995)
● Executive for labour unions dissolved
● Execution of the Ogoni Nine (1995)
○ Ogoni - fishermen who lived near the Niger river delta where oil
extraction took place
○ Held protests against oil drilling, causing capital flight as international
companies heard of their plight
● Divestment of foreign holdings (even oil declines)
○ Active drilling rigs falls from 36-14 (1991-94)
● Rising oil prices offset by corruption
○ By his death (1998), Abacha and his family has embezzled $3 billion
○ Central bank governor owned 37 homes
● Inflation rose above 150% per annum
Economic growth and living standards
● Beva, Collier and Gunning (1999) - private consumption rose by 1.5% per
year until the mid 1970s
○ Fell by 7% per annum in the 1980s
○ Rose after liberalisation
● Private consumption was lower in 1985 than the early 1950s
● North made relative gains in standard of living in the 1950s and losses after
the 1980s
● Standard of living was generally higher in urban than rural areas - urban bias
○ May have been reversed in the 1980s
○ Rising food prices increased farmers’ income
● Wage-earners did better than self-employed in the cities
○ Gap narrowed in the 1980s
The Ethiopian famine
Economic policies of the Derg
● Marcus (2002) - Major Mariam’s derg (committee) overthrows the emperor in
1974
○ Issues the Declaration of Socialism
○ Aims of a 1 party state, public ownership of main sectors and collective
agriculture
● 1974/5 - nationalisation of private financial institutions and most industry
○ Including foreign-owned companies
● Land reforms to gain Oromo support
○ Oromo - an ethnic group making up 30% of the population
○ Nationalisation of all rural land
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