WHAT IS SAP/SFEM? IT’S EFFECT ON WORKERS WITH SPECIAL REFERENCE TO TEXTILE INDUSTRY

WHAT IS SAP/SFEM? IT’S EFFECT ON WORKERS WITH SPECIAL REFERENCE TO TEXTILE INDUSTRY

When I agreed to discuss this question in a seminar attended by experienced workers from Textile Industry, my response was what practical issues could be raised with such comrades on concrete problems pertaining to the impact of SAP/SFEM ON THE Textile Workers. Nevertheless, I thought I could still raise some basic assumption on the question at stake for discussions to enable us have a broader practical knowledge through questions and comments.

Given the nature of this topic the first logical question to ask is what is SAP? In order to understand what SAP means, it is more appropriate to refer to immediate past economic history of this country. It is a common knowledge that towards the first half of 1982 Nigeria’s economy went into serious economic difficulties. The manifest difficulties of the economy included balance of payment crisis, the inability of Nigeria’s state to service its short-term and long-term debt, inflation, unemployment, retrenchment, etc.

The causes of these difficulties were undoubtedly not unconnected with the neo-colonial capitalist structures of Nigeria’s economy which subjected our people to exploitation by imperialists and their local lackeys.

It is this general development which led to Nigeria’s government to apply for IMF support loan in 1982. The idea, behind this support loan was to allow Nigeria’s state and businessmen, local and foreign to obtain credit facilities, to sustain importation of raw material and machinery to keep up production.

However, IMF support loan is always accompanied by certain conditionality which provide the basis of what is called the structural Adjustment Programme (SAP)
These conditions include things like removal of subsidies on petroleum products and fertiliser, reduction of subventions and loans to parastatal and privatising some of them, withdrawal of industrial incentives to industrialists, devaluation of currency, liberalisation of the economy, retrenchment, wage-freeze, etc.

Since 1982, during the civilian administration and even during the repressive Buhari/Idiagbon regime, these measures have being effectively resisted by Nigerian people.

The big problem of Banagida regime was therefore, how to make the Nigerian people accept the IMF conditions. That’s why IMF loan debate was launched in November, 1986. Still, the responses of the majority of Nigerian people was to reject the loan and the conditions which accompanied it.

However, while the Banagida regime could not go against the popular opinion, he claimed to resolve the difficulties facing the economy through a deceptive method of rejecting the IMF loan while implementing the IMF structural Adjustment Proposals (SAP).

The President claimed that the SAP is indigenous and independently designed by Nigeria’s policy makers. This is far from the truth. The truth; however is that the SAP is a package of proposals which the IMF dictated since 1982 as conditionalities for extending its own loan or helping Nigeria obtain other loans. So, the fact that Nigeria did not accept IMF loan, it is yet guaranteed by IMF to obtain loan from other world financial institutions.

What is SFEM?
SFEM is simply a way of affecting devaluation which the IMF regards as the main element of SAP. It is one of the central pillars of market forces economy which SAP introduces. The components of this market forces are de-regulation of the economy, privatisation, subsidy withdrawal and wage freeze.

Since the introduction of SFEM in September 1986, it devaluates the Naira by about 400%, has facilitated the repatriation of multinational profits, and encouraged speculation by Nigerian businessmen.

The Effects of SAP/SFEM on Industry
Nigeria’s policy makers thought that SAP/SFEM is designed to assist industry by promoting export promotion industrialisation. However, there are three major aspects of SAP/SFEM which have a negative effect on industry. These are:
1. High cost of foreign exchange
2. Removal of government protection for local industry
3. SFEM has also been encouraging the flight of capital from the country by facilitating the repatriations.
4. Another destructive aspect of SFEM is on small-scale industrialists. This is largely because foreign exchange and imports become expensive for small-scale enterprises and are likely to be displaced by larger corporations.

The Nigeria’s Textile Industry is one of the oldest industries in the country. It has the largest number of manufacturing establishments. As early as 1975 the industry accounted for 16% of value added and 25% of total employment in the manufacturing sector. As such it presents a very good example of SAP/SFEM impact on the manufacturing sector in the country. In fact the Nigeria’s Textile Industry has even before the introduction of SAP/SFEM being battling with crisis arising from smuggling activities which eventually led to decline of the Textile markets and also by the increase in the prices of cotton which amounted to increase in cost of production. The impact of this crisis on the industry was massive retrenchment of workers to the extent that employment of Textile Workers fell from 200, 000 in 1970’s to about 80,000 in December 1983. Also by 1983 about one third of the Textile Mills have temporarily closed down while the remaining two-thirds are operating at between 30% and 40% capacity. Some were even operating in a three day week.

One important question to ask is whether the SAP/SFEM has succeeded in correcting the distortions of the economy in general and industry in particular. I will suggest that it doesn’t.

1. The Second-Tier Foreign Exchange Market has not succeeded in eliminating Black Market for currency, therefore smuggling continues to boom.
2. That the underlying assumptions of the SAP/SFEM is to promote export-manufacturing by local industries, but it is this same mechanism which removes protection on local industries to enable them produce at full capacity.
3. That the authors of SAP/SFEM predicted accelerated growth of Nigeria’s economy, but it is no other than president Babangida, in his 1987 budget speech stated that despite the introduction of SAP/SFEM, the economy has not moved an inch.

Effects on Workers
The only thing which one can say SAP/SFEM is achieving is that businessmen have been making large profits. Although SFEM as a whole does not seem to set correcting the distortions of the economy, the businessmen are compensated by high prices to consumers. For example the general level of consumer prices with 1982 as 100 was 278.6 in 1986. That is to say that it rose by an average of 69.7 points a year in these industries.
Since a wage-freeze is imposed the condition of workers becomes worst. Obviously the importation of some raw materials has led to a slight increase in employment but unemployment is still a very serious problem. Unemployment among those without school is very high, unemployment among those with primary, secondary and university education is increasing while continuous retrenchment is worsening the situation.

Another grievous aspect of the structural Adjustment Proposals on industrial workers in particular is how conditions of work in our factories are deteriorating even against the established laws of the land. I personally know that in many factories in Kano, you find three categories of workers:

Those that are called permanent workers: this category has the right to unionise and fights for its right with the management
Casual workers: are contracted to work for certain days, for twelve hours daily at N3.00 – N4.00 per day. This category of workers has no right to unionise and could be retrenched at any moment.
The condition of the third category of temporary workers is almost the same with that of casual workers except that this category of workers is employed on contract.

These are not the only scenario in our factories. In attempt to declare super-profits manufacturers used extortionate methods in their factories.

Conclusion
Let us now conclude by making some observations. It is obvious that Nigeria’s policy-makers did not initiate SAP/SFEM independently of IMF, rather it is a great design of IMF, to weld us irrevocably to the world capitalist system. Thus instead of SAP/SFEM correcting the imbalance in our economy and the problem of inflation, unemployment etc. the Nigeria’s state is busy exploring through the SAP ways of debt payment and debt services to our foreign creditors. At this stage we will like to recall that the SFEM has already now merged with the First-Tier Foreign Exchange, with the implications of multiplying our foreign debt by almost five times.

The Nigerian workers have through their central Labour Organisation, the NLC, and at different branches and industries resisted this assault on their living conditions. While some limited concessions might be granted here and there, it is our belief that a more concerted effort of organisation and unity of Nigerian workers are imperative to evolve an alternative system to SAP/SFEM. For an alternative to SAP/SFEM is the only option left for Nigerian workers to improve their conditions. This will require a revolutionary political will to reverse the existing power relation in the country which allows the control of the state by the neo-liberal international and local forces.

Mu’azu Mohammed Yusif
Department of Political Science
Bayero University, Kano
Wednesday 29th July, 1987
Time: 3.00pm
At Federal Palace Club