Structural Adjustment and State-Labour Relations under the Babangida Regime

Isaac N. Obasi


The task of maintaining industrial peace in an economy undergoing structural adjustment was a herculean one. The intervening role of the state in performing this herculean task was crucial given the fact that the Structural Adjustment Program (SAP) was a state-imposed and directed economic recovery program.

In October 1985, the Babangida administration declared a state of economic emergency that was intended to last up till December 1986. Before the expiration of this period, the administration launched a two-year structural adjustment program in July 1986. But even before the declaration of a state of economic emergency, President Babangida had earlier in September 1985, while swearing in the National Council of ministers, outlined the major economic task before his administration thus:

We intend this administration to be a government of action committed to a program with clear economic and social goals. The main aims are to revive the economy, restructure external and internal borrowing, streamline the administration, promote exports, recognize the realistic value of the Naira, reduce government involvement in all aspects of Nigerian life, and eliminate waste and corruption. -‘

However, the 1986 Budget which the president declared as the beginning of a new path and the inauguration of a new era of economic reconstruction, social justice and self-reliance,’ clearly articulated and adopted some of the measures of a structural adjustment program that was later launched in July of that year. The President in that budget declared that the challenges involved not only a reduction in public expenditure and a general structural adjustment of the entire economy but also a fundamental and enduring shift in the attitude of our people, their tastes and demand profile should move towards home grown resource-based goods and services. He then announced the removal of 80% in the existing oil subsidies, and a plan to pursue the privatization of government-owned parastatals and companies.

These measures, marked the beginning of a new era in the social and economic lives of the people. They also had far-reaching implications for industrial relations management in Nigeria. But more importantly, they profoundly influenced the character of state-labour relations in Nigeria.

It is against this background that this paper examines state-labour relations under SAP in order to draw lesson that could serve as pointers to future management of industrial relations in Nigeria. This is done on the theoretical assumption that SAP had an inherent conflict -inducing character which by its logic, produced what we call conflict-prone organizations.

If SAP had an inherent conflict-inducing character, why then was it adopted? What objectives did it aim at achieving? What were the main elements of SAP and what were its core policies. And what were its mixed bag of successes and failures?


Objectives, Components, Successes and Failures of SAP

The launching of SAP in July 1986 by Babangida administration was necessitated by the prevalent sordid state of the economy. It was the regime’s antidote to the serious economic crisis of the nation which could be characterized as follows: First, the economy was facing a crisis of dwindling revenue from oil, the nation’s major foreign exchange earner. Secondly, many industries were operating far below their installed capacity utilization as a result of severe shortages of raw materials, spare parts and high cost of production. Consequently, there was widespread retrenchment of their staff. Thirdly, and deriving partly from the second, there was a high rate of unemployment.

Fourthly, the per capita income was rapidly declining even as there was high rate of inflation coupled with a very high level of domestic and foreign debts. Fifthly, there was heavy dependence on foreign goods. Furthermore, most public agencies could not pay the salaries of their workers as and when due.

Finally, corruption was pervasive.

SAP, in the words of the then Finance Minister, Chu Okongwu, combines a nexus of measures aimed at promoting economic efficiency and long term growth with stabilization policies designed to restore balance of payments equilibrium and price stability. He outlined then the specific objectives A SAP as follows:

  1. to restructure and diversify the productive base of the economy in order to reduce dependence on the oil sector and on imports.
  2. to achieve fiscal and balance of payment viability over the period;
  • to lay the basis for a sustainable non-inflationary or minimal inflationary growth;
  1. to reduce the dominance of unproductive investment in the public sector, improve that sector’s efficiency and enhance the growth potential of the private sector.`

Continuing, the Minister outlined the following as the main elements of the adjustment program:

  1. strengthening of demand management policies
  2. adoption of measures to stimulate domestic production and broaden the supply base of the economy;
  3. adoption of a realistic exchange rate policy through the establishment of a Second Tier Foreign Exchange Market (SFEM);
  4. rationalization and restructuring of the tariff regime in order to aid the promotion of industrial diversification;
  5. progressive trade and payments liberalization;
  6. reduction of complex administrative controls and fostering reliance on market forces;
  7. adoption of appropriate pricing policies for public enterprises; and
  8. rationalization and commercialization/privatization of public sector enterprises.

Consequently, the core policies of SAP involved measures which aimed at,

  1. correcting the serious over valuation of the naira through the setting up of a viable second-tier foreign exchange market coupled with adjustment of the official rate and aimed at a convergence of the two rates as soon as possible
  2. overcoming the observed public sector inefficiencies through improved public expenditure control programs and rationalization of parastatals; and
  3. relieving the debt burden and attracting a net inflow of foreign capital while keeping a lid on foreign loans.

The implementation of SAP brought a mixed bag of successes and failures. According to the minister, SAP succeeded in doing the following:

  1. It fostered more rational conduct as well as efficiency and competition by economic agents on the basis of price and service to the consumer. It made government firms and households to be more cost – conscious than before;
  2. It improved the allocation of resources both foreign exchange and manpower utilization;
  3. Through increasing access to foreign exchange, it enhanced capacity-utilization in many industries;
  4. It boosted export as a result of the alteration of relative prices via exchange rate adjustment which made exports more competitive;
  5. Through the export boost, it led to the enhancing of the commodity prices in naira terms and incomes to farmers especially in the area of cash crops;
  6. It enhanced government revenue; and
  7. It gradually restored international confidence in our external payment arrangements giving hope of a return to international credit worthiness.

The following were, however, identified as the side effects of SAP:

  1. inflationary repercussions;
  2. credit squeeze; and
  3. increased importation of finished goods.
  4. It is very important to add that certain changes which SAP brought about affected

Nigerian labour adversely and further marginalized them. These changes include retrenchment, privatization, commercialization, withdrawal of subsidies on certain goods and services, reduction in government expenditure, scrapping of commodity and marketing boards, deregulation of the price control system and fostering reliance on market forces. All these had profound effects on the welfare and standard of living of workers. For instance, they led to increased hardship and frustration and also made workers more conscious of their poor material conditions thereby resorting to the use of militant behaviour in reacting to further economic measures that exacerbated the existing poor conditions:

Labour before the Introduction of SAP

The problem of Nigerian workers and the existence of antagonistic relations between the state and labour no doubt antedated the era of structural adjustment. What SAP did was however, to aggravate the problems and consequently exacerbate existing antagonistic relations. During the economic boom in Nigeria in the seventies, workers could not be said to be free from economic and social problems. They suffered from the hardship imposed by low income and inflation. Industrial disputes were also a common feature of the industrial relations system. The high frequency of strikes recorded during the 1974/5 year was a demonstration that workers and their employers were not in the best of terms. It is vital to observe that hardship and frustration were the major reasons why workers went on strike during that period even though the demand for salary increases following the Udorji report was one of the major factors accounting for the high incidence of strikes. The workers wanted better conditions of service. For instance, during this period, car loan and other allowances were in existence.

However, with the onset of the period of economic recession and the gradual loss of the benefits workers had enjoyed hitherto, elements of hardship and frustration began to set in. For instance, early attempts by the state to cut wasteful expenditures going into workers benefits was introduced under the aegis of austerity measures adopted by the Obasanjo military regime. The strike action embarked upon by the Nigerian Civil Service Union in 1979 was in reaction to the abolition of car loans and basic allowances by that regime.

During the period of the Second Republic (1979-83), labour disputes were also very frequent. For instance, from 1979 to 1982 there were about 1,507 work stoppages. As Iwuji argues “workers took advantage of the return to civilian administration and collective bargaining during the period to demand for better conditions of service.” 7 However, elements of hardship and frustration that started under the Obasanjo military regime continued as many public organizations could not pay their workers salaries as and when due. As Ali Ciroma (President of the NLC) observed, between 1981 and 1983, not less than one million workers were retrenched,” resulting in unemployment figure as at 1983 of over five million -“

The emergence of another military regime in 1983 could not attenuate the sufferings of workers. In’ fact the situation worsened. For instance, in 1984, the government announced a downward revision of fringe benefits in the public sector in response to the prevailing economic recession. “‘ There were numerous cases of early and unmerited compulsory retirements, purges and retrenchments. It then became official policy that those who had put in about 30 years in the public service should retire. Even the private sector exploited this situation to inflict further hardship on workers by way of high prices. Worse still, many companies that made huge profits also retrenched workers under the pretext of economic recession. During this period, workers also suffered the problem of scarcity of essential commodities. Indeed, economic hardship became a dominant feature of workers’ condition in Nigeria.

In reaction to these numerous problems, labour through its central organ, the NLC, declared in May 1986:

Nigerian workers would like to re-affirm our unalloyed commitment to the continuous fight against these societal ills until the tree that nurtured them is pulled by the root. We would also like to appeal to those in power to desist in the interest of the nation from pursuing any further retrenchment exercise as any contemplation of such a policy will certainly be met with our resolute resistance.”

From the brief review of the problems above and the reaction of labour to these problems, it could be concluded that state-labour relations before SAP were unhealthy as it was antagonistic. Labour was experiencing hardship, frustration and higher level of consciousness of its poor objective material condition. It thereafter, in reaction, vowed to use militant action to resist further imposition of hardship. The resultant effect was increased suspicion and hostilities between the state and labour. This led the state to become more security conscious and also to adopt-repressive measures to suppress labour’s opposition to its economic policies.

Labour Relations under SAP

With the persistence of the economic recession and indeed the worsening of the situation, the problems facing labour continued to assume more serious and agonizing dimensions. And with the introduction of SAP, some of these problems became very unbearable. For instance, inflationary repercussions became a troublesome phenomenon within the context of the hither of existing wage freeze. Even when the wage freeze was lifted following the 1988 budget, it was with qualification for, according to the president, workers were free to negotiate with their employers, wages and salaries which are sensible and affordable on the one hand but was considerable restraint on the other hand, if the gains of structural adjustment are not to be frittered away.”

Furthermore, the unemployment situation worsened with the scrapping of commodity/marketing boards, and the rationalization exercise carried out in some public sector organizations. In addition, this ugly situation was worsened when certain percentages of the subsidy on petroleum products were on two occasions (January 1986 and April 1988) removed. Also there was removal of subsidy on some public goods such as fertilizers and other agricultural inputs. Equally significant as an addition to workers problems was the commercialization of the Nigeria Airways, National Electric Power Authority (NEPA) and Nigerian Railway Corporation (NRC). Under this policy the Nigerian Airways, NEPA and NRC actually increased charges on their services. “In fact, some ministers in charge of these public utilities unequivocally stated that services provided by their organizations were not meant for the poor” This period marked the beginning of erosion of middle class economic position in Nigeria. Members of the middle class started losing their economic benefits. The loss of car loan facility became an accepted condition, while those who already had their cars could no longer maintain them.

As the increasing burden imposed by this regime of hardship on labour became persistent with no hope of solutions in sight, the relations between the state and labour became more and more antagonistic. Certain key variables that impinged on this antagonistic relationship are: (i) SAP, (ii) hardship (iii) frustration (iv) consciousness (v) militancy and (vi) repression.

The degree of antagonism was largely dependent on the intensity of these factors. However, SAP was the singular factor that exacerbated these other factors. A major lesson can be drawn from this. SAP was the cum factor that united these factors. These relationships can be properly explained in what we refer to in this work as ‘A Model of State-Labour relations under SAP which is given diagrammatic representations in tables 1 and 2 (See Appendix E).

This model, referred to simply as the ‘S-L-R model under SAP’, attempts to explain the effects of SAP on state-labour relations in an economy experiencing a recession. This model can be explained as follows:

When an economy is experiencing economic recession and a harsh and ‘fundamental’ economic recovery measure such as SAP is adopted, in the process of revamping the economy, a number of reactions take place. The first is that widespread hardship is experienced by labour. This in turn leads to frustration. The combination of these raises the level of consciousness of labour with respect to its poor objective material conditions. With this high level of consciousness, labour becomes increasingly militant in its reaction to state economic and political policies. In reaction, the state adopts repressive measures to check and control labour’s militancy. All these exacerbate the degree of antagonism between the state labour. The degree of antagonism will be higher when there is lack of ideological harmony between the government and labour leaders.

This model can be used to explain state – labour relations in any economy undergoing an I.M.F. – oriented SAP. The experiences in Sudan, Nigeria, Zambia and many other African countries provide us supportive evidence to the model. Although the experiences may not be exactly similar in all countries undergoing structural adjustment, there is usually a similarity in outcome, i.e. increased antagonism between the state and labour. The antagonism may be manifested when workers revolt, riot, demonstrate or strike. The major lesson therefore is that regardless of the introduction of some measures to cushion the harsh effects of SAP on workers, state labour relations under SAP remains highly antagonistic. This makes the incidence of strikes, demonstration by workers and students, as well as riots and revolts by them a common feature of industrial relations under SAP. (See Table in Appendix

The “Carrot and Stick” Policy

From the discussion above, the inescapable conclusion is that a structural adjustment program exacerbates state-labour antagonism. The Babangida government was no doubt aware of this, hence it employed the “carrot and stick” approach in handling the entire situation. Recognizing that SAP had had negative effects on the living standard of the people, the government, during the period under review, introduced some economic measures to cushion the effects of SAP. Thus, the government in its 1987 budget, provided some degree of tax relief for workers to enhance their disposable incomes. The establishment of the Directorate of Food, Road and Rural Infrastructure (DFRRI) early in 1986 was also an attempt by the government to improve the state of rural infrastructure’ nationwide. It also established the National Directorate of Employment to help generate- employment opportunities. In addition, the Mass Transit program introduced in the 1988 budget was meant to alleviate the transport difficulties of the urban masses.

Furthermore, the government in its 1988 budget announced a new remuneration package. It introduced later the Elongated Salary Structure (ESS) and new improved fringe benefits. It went further to lift the wage freeze. President Babangida in the 1988 budget noted:

After a period of economic belt-tightening which has produced good effects in consumer attitude, there are now signs that the economy needs to be reflected if it is to move out of the sluggish phase occasioned by lower consumer spending power. It is for this purpose and in pursuance of the era of deregulation, that the wage freeze which has been in force for some time is now lifted.

The government nevertheless placed restrictions on how negotiations for a new salary and wage package could be undertaken under SAP. According to him:

Workers will now be free to negotiate with their employers on wages and salaries which are sensible and affordable on one hand but with considerable restraint on the other hand, if the gains of structural adjustment are not to be frittered away, An atmosphere of cordial collective bargaining is the one that can guarantee a knowledge that freedom to negotiate revision of wages and salaries will not be taken as a license for employers to make unreasonably to modest claims or for worker to make impossible and extravagant demands. “(Emphasis added).

The “carrot and stick” approach did not successfully reduce the economic hardship of workers. The strike action embarked upon by workers in April 1988, following the removal of a small percentage of the remaining subsidy on petroleum products was a strong indication that the measures could not achieve much to ameliorate the poor living standards of the people. It also showed how increasingly frustrated the people were, as well as their increased level of consciousness of their poor material conditions as it demonstrated the growing militancy of labour under SAP.


On the basis of the foregoing analysis, the following conclusions can be made. The Structural Adjustment Program adversely affected state-labour relations by engendering hardship and frustration among the workers. Workers in turn became increasingly conscious of their poor material conditions. Hence increasingly, they became militant in their opposition to the government. The “government in reaction to labour’s militancy, adopted repressive measures which consequently exacerbated the antagonistic relations between it and labour. Such a situation hardly provided an atmosphere of industrial peace needed for the realisation of the economic recovery program.

Be that as it may, the following recommendations may be appropriate. For an atmosphere of peace to prevail in an economy experiencing recession, harsh economic policies such as SAP should not be introduced and should be scrapped where they exist.

Secondly, the use of repressive measures by the state to control labour should be minimized in favour of persuasion, dialogue and negotiation. The tendency to resort to proscription of labour unions by the government is a defective strategy for settling state-labour conflicts and should therefore be discouraged.

Thirdly and more_ importantly, industrial relations managers in Nigeria, particularly in the public sector, should stop underrating the high level of consciousness of Nigerian workers. Although the collective power of labour got weakened through government-induced economic privation and repressive measures, the fact remains that the power of labour is historically known to be a ‘bomb’ that can explode when pushed to the wall. The successful resistance by organized labour and other groups against the increase in petroleum products under the present Obasanjo regime this year 2000, is a demonstrative evidence of labour’s power.

The lasting lesson from this historical review is that a harsh economic policy like SAP requires a lot of ameliorative policy measures to cushion its negative effects. The Babangida administration rightly recognised this, but the problem was that the carrot it adopted were not enough to address the prevailing economic hardship of workers engendered by SAP.



  1. See Isaac N. Obasi: State-Labour Relations SAP in Nigeria, Ibadaw Sam Bookman Publishers 1999, P. 1. This paper is an extract from this book.
  2. Ibrabim Babangida: Address delivered on the occasion of the swearing in of the National Council of Ministers on Thursday September 12, 1985. (see New Nigerian Tuesday September 17, p5).
  3. Ibrahim Babangida 1986 Budget speech of the Federal Republic of Nigeria, (See the Dail.), Sketch. Wednesday January 1, 1986, p 2.
  4. See Chu Okongwu: A Review and Appraisal of the Structural Adjustment Programne, July 1986 to July 1987, special press Briefing. Lagos: Federal Government Printer. 1987, p4
  5. See Prince Tony Momoh, Minister of Information and Culture who, in his third letter to Nigerians, summarized and objectives of SAP as Mobilization, reorientation, rehabilitation, restructuring, decentralization, productivity and self-reliance.
  6. See E.C. lwuji: `Settlement of Trade Dispute,’ in Dafe Otobo and M. Omole (eds): Readings in Industrial Relation for Nigeria, Lagos: Malthouse Press Ltd. 1987, p207.
  7. Ibid p 208
  8. Ali Ciroma: 1984 May Day Address’, NLC P3
  9. See Nigerian Labour Congress: ‘Towards National Recovery: Nigerian Labour Congress Alternatives.’ (Undated) p4.
  10. Tayo Fashoyin and Ukandi Demachi: Industrial Relations in the Civil Service, in Demachi and Fashoyin (eds): Contemporary Problems in Nigeria Industrial Relation. p 86.
  11. Ali Chiroma: ‘1 986 May Day Address’ NLC, p2.
  12. Ibrahim Babangida: 1988 Budget Speech of the Federal Republic of Nigeria National Concord, Monday, January 4, 1988 p 7. )
  13. Isaac N. Obasi: “Commercialisation of Public Corporations in Nigeria: Implication for Nigeria’s Political Economy in the 21st century” Paper presented at the National Conference on Nigeria in the 21st century, held at ABU, Zaria, on 4th – 9th May, 1987, pp4 and 12.
  14. The Minister of Communication actually made this statement on two different occasions while briefing newsmen.
  15. This S-L. R. Model and its explanations are the original expositions of this author.
  16. Ibrahim Babangida: 1988 Budget Speech of the Federal Republic of Nigeria.