The math-not-morality argument raises a question: if the FX structure was primarily a policy error, then why did it survive the coup? Shagari defended the overvalued naira and import-license rationing as a democrat; Buhari defended the same structure as the military anticorruptor who'd just jailed Shagari's colleagues. How did two regimes with opposite theories of government have the same distribution mechanism?
My sense is the structure was doing something for someone. Otherwise, it doesn't survive two regimes. And if the bribe chain was structural rather than pathological, as argued, then was WAI just targeting the retail end while the wholesale end stayed intact?
Curious whether the import-license holders came through the Babangida transition too, and what that means for how much work the IMF conditionality actually had to do.
Devaluation was politically suicidal for different reasons under each regime, which is why both refused it. Shagari refused because deval would spike import prices and hurt the urbanites that he needed votes to win. Buhari refused because he framed his coup a "rapidly returning to prosperity" , and because he overpromised, his entire legitimacy depended on order and performance, not market shocks where imports would cost more. So the same policy (defend the naira) served two different political logics.
The structure was overdetermined, propped up by electoral incentives under Shagari and by stability & performance under Buhari. Different motives, same outcome of a policy.
On the Babangida question, yes license holders did survive the transition and it explains SAP outcomes pretty well.
Babangida destroyed import licenses and floated the naira via Second tier fofeign exchange market(sfem), which collapsed the arbitrage between the official and black-market rates. These reforms destroyed the import-license rent & arbitrage rent schemes.
But the same connected class simply migrated to the new rent opportunities SAP created: bidding rings in the SFEM foreign-exchange auctions, the explosion of banks (41 to 120) many of which were vehicles for round-tripping FX, and the privatization process where state assets were grabbed cheaply by insiders.
So its like the people and the logic of rent capture just moved from one version to another.
Also, when you mentioned the IMF conditionality. Babangida didnt actually take the loan. His structural adjustment program was his own program, but he refused the IMF money.
During Babangida's entire rule, he never drew an IMF loan, look at the imf loans in the 1980s & early 90s, you'll see they were never drawn:
Yes, WAI and the price-control raids targeted the retail end, the market women, the small traders, and the visible final price. The wholesale end, which I assume you mean the license allocation, the FX arbitrage, the bribe chain at the ministry and port level, stayed largely intact. That's why WAI failed on its own terms. Buhari beat up the symptom (high retail prices) while the disease (the rent-generating allocation system upstream) kept running.
I cannot tell if its stupidity or ineptitude with the policy makers tbh. Because i do see even policy makers in the US say and execute dumb stuff like this. But if your point is "Was WAI theater?" I would say yes. I also wouldnt be surprised if it was sincere theather either.
But yes, the anticorruption campaign was didnt attack real corruption. I think its because Buhari's mental model did not see import licenses or FX allocation as corruption. He just saw it as state policy control.
I think he probably saw the licenses & the wholesale part as a rationing instrument, not as a rent machine. I dont think he sees patronage as corruption either, because in a place like Nigeria, how else do you ensure loyalty and survival without it?
Control over FX allocation, import licenses, contracts, and state enterprise boards is the currency of that loyalty. If the military had control over that, the idea was Buhari wouldnt be couped. In fact if the dismantled that whole system, he wouldnt have even lasted a year.
Babangida understood the patronage game better than Buhari did and played it more fluidly, which is why Babangida lasted eight years and Buhari lasted twenty months.
I wish more market women and farmers were consulted about the nation's economic moves. In 16 Century Spain, there was so much gold poured into the coffers of the crown that the people stopped cultivating crops. They could buy food in markets with gold. Then the gold, silver, and jewels were spent and there was no food. Cultivation had stopped. It's a warning for Spain and the US. We have money coming in by rents and manipulation of others' money, buying and selling of land to foreigners, and who-knows-what, that our farming is for crops. Soybeans to China (when the situation is positive) or some other crops--corn to replace oil--that we won't have the food we need. Now we have gold fracked from the ground at the cost of water pumped in. Insanity, when we need water more than oil. We are making the same mistakes the rulers of Nigeria did. For money a few at the top will gather. Our farms are dying. Our land is dying. And for what? America isn't wiser or smarter than anywhere else.
This brought back some memories! I read just a little about how Buhari was at the time he was elected to be President a second time. An unlikely comeback story that one!
Co-incidentally New Zealand was also going through a massive crisis at the same time. The economy was seriously mismanaged by Prime Minister Muldoon (who was also the Finance Minister), to the point that the country completely ran out of foreign exchange (which was only discovered the day after he lost an election). Massive amounts of subsidies, benefits, and import controls were swept away by following governments and ten years later it was as if it had never happened so successful was the recovery. Inflation rates also dropped from 18% to 2%.
From what I just read, the Buhari-idiagbon administration inherited a terrible situation and it seems like economically, things were getting stabilised.
It's a tragedy that the only revolutionary coup to succeed in Nigeria was replaced by the demonic Babangida regime.
Sort of, fiscal deficits decreased and FX reserves went up, but interest was taking more export earnings, bringing Nigeria closer to another default. Also, less government spending is painful for thr populace.
So he was stabilizing in 2 dimensions (FX and deficits) while another dimension (interest payments) wasnt stable at all.
Also for the FX reserves, it going up was due to import strangulation which was killing Nigerian manufacturing even more than Shagari did. So thats another bad dimension.
I agree he inherited a poor situation. But frankly, Nigeria doesn't really "stabilize" until global prices rise again in the late 1990s.
The math-not-morality argument raises a question: if the FX structure was primarily a policy error, then why did it survive the coup? Shagari defended the overvalued naira and import-license rationing as a democrat; Buhari defended the same structure as the military anticorruptor who'd just jailed Shagari's colleagues. How did two regimes with opposite theories of government have the same distribution mechanism?
My sense is the structure was doing something for someone. Otherwise, it doesn't survive two regimes. And if the bribe chain was structural rather than pathological, as argued, then was WAI just targeting the retail end while the wholesale end stayed intact?
Curious whether the import-license holders came through the Babangida transition too, and what that means for how much work the IMF conditionality actually had to do.
Great Qs:
Here's my take.
Devaluation was politically suicidal for different reasons under each regime, which is why both refused it. Shagari refused because deval would spike import prices and hurt the urbanites that he needed votes to win. Buhari refused because he framed his coup a "rapidly returning to prosperity" , and because he overpromised, his entire legitimacy depended on order and performance, not market shocks where imports would cost more. So the same policy (defend the naira) served two different political logics.
The structure was overdetermined, propped up by electoral incentives under Shagari and by stability & performance under Buhari. Different motives, same outcome of a policy.
Thanks - v helpful clarity.
3)
On the Babangida question, yes license holders did survive the transition and it explains SAP outcomes pretty well.
Babangida destroyed import licenses and floated the naira via Second tier fofeign exchange market(sfem), which collapsed the arbitrage between the official and black-market rates. These reforms destroyed the import-license rent & arbitrage rent schemes.
But the same connected class simply migrated to the new rent opportunities SAP created: bidding rings in the SFEM foreign-exchange auctions, the explosion of banks (41 to 120) many of which were vehicles for round-tripping FX, and the privatization process where state assets were grabbed cheaply by insiders.
So its like the people and the logic of rent capture just moved from one version to another.
Also, when you mentioned the IMF conditionality. Babangida didnt actually take the loan. His structural adjustment program was his own program, but he refused the IMF money.
During Babangida's entire rule, he never drew an IMF loan, look at the imf loans in the 1980s & early 90s, you'll see they were never drawn:
https://www.imf.org/external/np/fin/tad/extarr2.aspx?memberKey1=740&date1key=2025-03-31
As a result, the imf didnt supervise his program.
2)
Yes, WAI and the price-control raids targeted the retail end, the market women, the small traders, and the visible final price. The wholesale end, which I assume you mean the license allocation, the FX arbitrage, the bribe chain at the ministry and port level, stayed largely intact. That's why WAI failed on its own terms. Buhari beat up the symptom (high retail prices) while the disease (the rent-generating allocation system upstream) kept running.
I cannot tell if its stupidity or ineptitude with the policy makers tbh. Because i do see even policy makers in the US say and execute dumb stuff like this. But if your point is "Was WAI theater?" I would say yes. I also wouldnt be surprised if it was sincere theather either.
But yes, the anticorruption campaign was didnt attack real corruption. I think its because Buhari's mental model did not see import licenses or FX allocation as corruption. He just saw it as state policy control.
I think he probably saw the licenses & the wholesale part as a rationing instrument, not as a rent machine. I dont think he sees patronage as corruption either, because in a place like Nigeria, how else do you ensure loyalty and survival without it?
Control over FX allocation, import licenses, contracts, and state enterprise boards is the currency of that loyalty. If the military had control over that, the idea was Buhari wouldnt be couped. In fact if the dismantled that whole system, he wouldnt have even lasted a year.
Babangida understood the patronage game better than Buhari did and played it more fluidly, which is why Babangida lasted eight years and Buhari lasted twenty months.
I wish more market women and farmers were consulted about the nation's economic moves. In 16 Century Spain, there was so much gold poured into the coffers of the crown that the people stopped cultivating crops. They could buy food in markets with gold. Then the gold, silver, and jewels were spent and there was no food. Cultivation had stopped. It's a warning for Spain and the US. We have money coming in by rents and manipulation of others' money, buying and selling of land to foreigners, and who-knows-what, that our farming is for crops. Soybeans to China (when the situation is positive) or some other crops--corn to replace oil--that we won't have the food we need. Now we have gold fracked from the ground at the cost of water pumped in. Insanity, when we need water more than oil. We are making the same mistakes the rulers of Nigeria did. For money a few at the top will gather. Our farms are dying. Our land is dying. And for what? America isn't wiser or smarter than anywhere else.
This brought back some memories! I read just a little about how Buhari was at the time he was elected to be President a second time. An unlikely comeback story that one!
Co-incidentally New Zealand was also going through a massive crisis at the same time. The economy was seriously mismanaged by Prime Minister Muldoon (who was also the Finance Minister), to the point that the country completely ran out of foreign exchange (which was only discovered the day after he lost an election). Massive amounts of subsidies, benefits, and import controls were swept away by following governments and ten years later it was as if it had never happened so successful was the recovery. Inflation rates also dropped from 18% to 2%.
From what I just read, the Buhari-idiagbon administration inherited a terrible situation and it seems like economically, things were getting stabilised.
It's a tragedy that the only revolutionary coup to succeed in Nigeria was replaced by the demonic Babangida regime.
Sort of, fiscal deficits decreased and FX reserves went up, but interest was taking more export earnings, bringing Nigeria closer to another default. Also, less government spending is painful for thr populace.
So he was stabilizing in 2 dimensions (FX and deficits) while another dimension (interest payments) wasnt stable at all.
Also for the FX reserves, it going up was due to import strangulation which was killing Nigerian manufacturing even more than Shagari did. So thats another bad dimension.
I agree he inherited a poor situation. But frankly, Nigeria doesn't really "stabilize" until global prices rise again in the late 1990s.
He's still better than Babangida tho. By far.