Nigeria: The IMF Prescription Must be Rejected
Tunde Amusa
"The removal of subsidies on petroleum products coupled with devaluation of the naira would precipitate a multiplier effect on prices in the system and its ripples in the economy would become greatly accelerated."The hue and cry that has characterised the determination of the Federal government of Nigeria to pursue the IMF loan since December 31st needs no emphasis. The loan itself, a 3-year extended credit totalling $2 billion (could be more now) if granted, would be utilized to revamp the Nigerian economy which faces imminent collapse. But quite a number of responsible Nigerians and students of the country's higher institutions of learning are not convinced that the IMF loan is the only means to bail Nigeria out of its present economic quagmire.
From TUNDE AMUSA, Kano.
Students of Ahmadu Bello University, Zaria organised a peaceful demonstration during the erstwhile Shagari administration against the pursuit of negotiations for the IMF loan. The Nigerian press has also lent sup port to the views expressed by the students on the same issue. A question which comes to mind immediately is: what is the IMF and why are nations (developing, of course) hesitant in approaching it, for assistance?
The IMF is a body charged with the responsibility of assisting third world as well as developed countries to resuscitate their shattered or misman- aged economies. Such assistance is often not without strings. It is worthy of note that the credit advanced to such needy countries is also not gratis. It is for a specified period.
Why then the fanfare over conditions to be fulfilled before such a loan is granted? Much as one would concede that there must be a set of conditions to be fulfilled prior to the grant of such loans, one has a strong suspicion that some of the conditions are obnoxious and are included to benefit countries with developed and healthy economies and therefore not in the national inter- est. It is interesting to recall that de- valuation of national currencies has featured in IMF's relief programme for developing countries since the inception of the fund and the effect of such measures has always been disastrous. A few instances would be cited later in this article to buttress this point.
An oil refinery: the oil money dries out, can the IMF help?
There have been series of meetings and protracted negotiations between representatives of the Nigerian government and IMF officials in both Lagos and Washington since April, 1983 when the loan application was offici- ally lodged with the fund. A few of the IMF conditions with question marks on them and which are not readily or immediately acceptable to the Federal Military government include (i) the liberalization of trade, (ii) removal of subsidies on petroleum products and (iii) adjustment of the naira exchange rate popularly dubbed 'devaluation'.
The austerity programme launched by the deposed NPN administration sought to eliminate waste in the government sector and reduce public expenditure but this was hardly achieved for reasons which are obvious to the ordinary Nigerian. The average Nigerian, however, saw the austerity measures as sanctions against the down-trodden.
How could the IMF honestly believe, under the glare of frivolous spending by people in government, that Nigeria was truly broke and needed a loan from the fund? The military have intervened once again and commendable efforts have been made to plug loopholes through which a considerable proportion of the country's resources has been siphoned. The military administration has currently waged a relentless war on personalities involved in kick-backs, import licence frauds, dubious contract awards and other forms of criminal activities inimical to the national interest.
Colossal sums of money representing mobilization fees for abandoned or uncompleted contracts are being retrieved with military zeal from firms and individuals. The existence of ghost employees in the public sector has also constituted a serious and constant drain on the country's resources and it is a matter of great relief that the federal military government is determined to uproot this cancer.
Even though oil revenue is dwindling with the enforcement of such measures by the FMG (and this will only make an impact if sustained), the economy is bound to show signs of recovery within the next couple of months. The existence of the austerity measures introduced by the immediate past civilian administration coupled with the additional courageous measures of the FMG are enough to meet most of the IMF conditions.
The removal of subsidies on petroleum products coupled with devaluation of the naira would precipitate a multiplier effect on prices in the system and its ripples in the economy would become greatly accelerated. In simple language, the removal of such subsidies would be accompanied by corresponding increases in the cost of all services associated with petroleum products. Such a situation would lead to a general increase in the cost of living which will erode the purchasing power of most Nigerian workers.
If the wage freeze clause embodied in the IMF package is to be retained, the labour union would advise itself appropriately. This is a logical scenario which should not be dismissed as unreal. It should be made clear that industrial action which amounts to industrial inactivity, is not in the national interest and should be avoided at all costs. Devaluation of the naira will cripple exports unless the government makes provision for the payment of export bonus but will this be in the national interest?
The devaluation of Ghana's official currency, the cedi by a margin unprecedented in its history, as part of the IMF requirement for the grant of a C370 million stand-by credit, has deeply plunged the economy of that country into a deeper mess. The government of the PNDC chaired by Flt. Lt. Rawlings introduced C200, C100 and C50 bills into the banking system soon after the cedi had been massively devalued in a budget statement by Ghana's Dr Kwesi Botchway Secretary for Finance and Planning. The cedi, sadly enough, has become absolutely worthless.
The economies of Sierra Leone, Zaire and Zambia have deteriorated as a consequence of the devaluation of their national currencies so why can Nigeria not learn from their experiences? Devaluation of the naira would spell imminent doom for Nigeria for the following simple reasons.
(i) Oil will be bought cheaply by the developed countries.
(ii) Imports will be expensive and the prices of finished products will be simply prohibitive.
(iii) Productivity will be at a minimum as a result of low morale of labour resulting from increases in prices of consumer and other items.
The supervisory role of IMF staff in the implementation of the package must be rejected unconditionally. Who pays the IMF personnel and in what currency? A case of robbing Peter to pay Paul?
Nigeria should not pursue efforts to obtain the IMF loan since the cost cutting measures introduced by the Federal Military Government would soon yield positive results.
