IMF’s Mixed Economic Solutions

FOR most Nigerians, the recent four-day visit of the International Monetary Fund (IMF) Managing Director Ms. Christine Lagarde to the country re­mains an economic voyage with somewhat cynical connotations and at the same time with perspectives that could help manage economic vulnerabilities es­pecially at a time Nigeria is battling with varied eco­nomic challenges. This is not Lagarde’s first visit to the country. In fact, her first visit to Africa as IMF’s MD was in Nigeria in late 2011. Lagarde seems to be visiting when there are serious economic difficul­ties. On her first visit, Nigeria was emerging from the 2008-2009 commodity price collapse and the bank­ing crisis that followed.

Ms Lagarde met with President Muhammadu Bu­hari, members of the National Assembly and some bank executives. Understandably she was on a mis­sion to help Nigeria get back to the ‘Giant of Africa’ position. But most Nigerians’ worry stem from the notion that IMF has been unfriendly to developing nations. The world’s financial institution has been largely famous in the past for experimenting in de­veloping countries economic models and policies that fit mainly to developed nations. Nigerians are wont be in a hurry to forget the Ibrahim Babangida’s years when IMF convinced Nigeria to adopt certain economic policies.

Even when some Nigerians raised alarm of un­convincing and suspicious implications at that time, IMF was able to influence the introduction and sub­sequent implementation of the Structural Adjustment Plan (SAP) programme. Even though there has been varied analysis on the programme, however, reviews and notes from the economic trajectory of the coun­try suggest that SAP was more like a ‘white man’s’ imposed economic flip-flop that didn’t deliver the anticipated gains. Many believe that Nigeria took a wrong step in accepting the IMF conditionality of the programme which was aimed at unleashing market forces and total decontrol but without the loan in defer­ence to dominant views.

On the present preoccupation of the IMF in Nige­ria, Lagarde did raise salient points and offered advice that could help the country maximise her immense po­tentials and manage what she described as ‘near-term vulnerabilities’. Truth is that Lagarde stated the obvi­ous- Nigeria is under economic stress. She made use­ful suggestions but at the same time made suspicious and unconvincing solutions. Lagarde first identified the global economic transitions and implications for Nigeria.

According to her, Nigeria as well as other countries in the West African region is in a phase now where commodity prices and capital flows are far less sup­portive unlike in the past. She said vulnerabilities have increased; the ability to manage shocks is restricted by low fiscal savings and reserve. She further gave a damning verdict by saying that for a country with a rapidly increasing population, there is almost no real economic growth in per capita terms.

Madam Lagarde, after rehashing the obvious eco­nomic realities, however, sees an immediate priority- a fundamental change in the way government operates. She said that this means hard decisions will need to be taken on revenue, expenditure, debt and investment going forward. She urged the country to act with re­solve- by stepping up revenue mobilisation. With Ni­geria’s debt relatively low at about 12 percent of GDP, Nigeria needs to make careful decisions on borrowing which weighs heavily on public purse. According to her, about 35 kobo of every naira collected by the Fed­eral Government is used to service outstanding public debt. As observed previously, I do not see the sense in government resorting to borrowing to service debts and also fund recurrent and capital expenditure. She also harped on the need for the government to exer­cise restraint by focusing on the quality and efficiency of every naira spent while urging that efforts should be made to streamline the cost of government and im­prove efficiency of public service delivery across the federal and sub-national governments.

No doubt, these are useful admonitions. They bother on the need for the country to ensure fiscal discipline, fight corruption, shun borrowings, and improve effi­ciency in public spending. At a time oil prices are even likely to remain much lower because of the boom of the United States’ shale oil and the coming back to the international market of the historically large producers of oil such as Iraq and Iran, Nigeria needs to be cau­tious and show tactfulness in implementing economic policies. More so, there is growing apprehension espe­cially on the strategic behaviour of OPEC’s (Organi­zation of Petroleum Exporting Country) and the clear drop in global demand for oil, especially in emerging economies.

Asides the convincing policy recommendations the IMF boss put forward, some issues she raised should be carefully scrutinized before acting further. Even be­fore the arrival of Lagarde, most Nigerians knew that the push for the removal of fuel subsidy will be among her agenda. The oil subsidy has been a big bogey. No doubt there have been growing concerns on the fuel subsidy regime, the issue should be carefully treated. The IMF boss reiterated the earlier stance of the world body on the need to quickly remove the fuel subsidy. In her submission, fuel subsidies are hard to defend, not only do they harm the planet, but they rarely help the poor. Granted that the fuel subsidy regime is laced with accusations of widespread corruption, deceits and back hand deals, methinks the focus of the present government should be more of how to ensure adequate local presence of refined products, fight the corruption in the processes and ensure that Nigerians do not suf­fer while there is abundance of oil. Without proffer­ing solutions, Lagarde wants further hardship on the average Nigerian. The fuel subsidy cannot be totally removed for now without ensuring that we have local refining capacity to cater for the needs of the people and at competitive but reasonable prices. I hope IMF is aware that the prices of petroleum products virtually dictate the stability or otherwise of virtually other areas of activities in Nigeria. Has she considered the cost of transportation and costs of living generally?

*Stanley Ibeku, researcher and programme officer, writes from Ibadan Business School