As a young analyst who has observed the pattern of IMF’s policy recommendation to developing countries in recent time – Jamaica and Greece, and its previous experience with Buhari socialism based economic system, predicted that Lagarde will never offer direct loans with conditionality but would rather position her establishment as a technical partner- a path which seems to serve the establishment more damage and seems to be working for the World Bank Group in the country. This prediction I made to a group of professionals before her press conference and feel its reproduction is important to this discussion as well.
“The IMF agenda has been published – meet the president, discuss with his key officials and National Assembly, discuss with key private sector players and perform similar activities in Cameroun. The reason for meeting the president and not discussing policy is already known as he may refuse to take its policy direction let alone loan, so they are not trying to influence him but influence his team especially the CBN Governor and The Finance Minister who are the two most important economic agents in Nigeria. Also, convince the National Assembly to buy in these policies and enacts law or make resolutions on it. A move Buhari will be constraints to ignore, as it may lead to destabilization of the government. Since one of IMF major policy is deregulation of all major sectors, the private sector will push for floating foreign exchange system, deregulation of oil & gas sector, removal of subsidies on major goods and a more loose economy with little government control. Note all this pays the private sector not the populace, so we should concentrate more efforts on the actions of these institutions not Lagarde meeting the president. It is a repeat of 1984/85 episode.”
Based on the validity of prediction, I seek to provide my other thought on IMF moves with an attempt to draw necessary stakeholders’ attention to the policy effect. Based on the present situation of the country, IMF will seek to support the government anti-corruption campaign and promise to assist in recovery of stolen funds, a move the government will buy in to. Alongside the offer of assistance would the following policy suggestion;
- FISCAL DISCIPLINE -REDUCING THE SIZE OF GOVERNMENT
One of the key policy of IMF to Buhari and various government agencies would be reducing the size of government, and by implication mean Budget Surplus instead of Deficit. Other actions towards achieving this would be encouraging total removal of subsidy on any goods including petroleum and other goods which attract government assistance. Some analyst would encourage this policy, but since Nigeria is an import dependent country it will occasion increase in prices of basic necessities for the common man and increasing the cost of living. Though, most countries have been removing or reducing their energy subsidy a situation which may difficult for Nigeria at present.
- RELAXING FOREIGN EXCHANGE CONTROL
Encouraging the CBN to relax its control on demand for forex would one main call by the IMF. Good as the call seems to businesses who rely on forex to facilitate transaction but it is holistically dangerous to the economy of the country, due to our import driven consumption pattern. Nigeria as a country will continuous be faced with higher demand for forex as most of her basic goods are import to even stationery, as such Naira would be at a disadvantage position against various foreign currencies needed to perfect this transaction.
The body would advocate that defending the naira will depreciate our external reserves and discourage viable foreign direct investment through citing cases like Goldman Sach removing the government bonds from its foreign government bonds and high withdrawal from foreign portfolio section of the Nigeria Stock Exchange, to drive home its point.
Also, this call for devaluation would have been supported as it would have benefitted export but experience have shown that Nigeria businesses will rather prefer importation to local production. Other issues around foreign exchange control is basically Nigerian factor which seek to affect all spheres of our lives. For now, the tightened exchange system should be maintained while the activities of parallel market operators and commercial banks be checked.
- DELISTING SOME GOODS FROM THE FOREX CONTROL
The removal of some basic goods, which can be manufactured locally, is a right move towards protecting the infant industries and increasing employment opportunities in the country. It is also aimed at curtailing the country’s exposure to shock in the international commodity market and reducing imported inflation from neighbouring West African countries.
The Beninese port has been notorious for ensuring inflows of various consumable foods mainly for Nigerian market, thus any inflation in the country will automatically be transferred to Nigeria through importation of goods from the country. At a time, the stated country’s government was accused of importation of large volume of parboil rice which are not to be consumed by her citizen but to fill the demand gap in Nigerian market while the country’s booming automobile market is a passionate appendage of Nigeria market without which it would have never existed.
It is as a result that Lagarde stated during her press conference that our policy direction will affect dearly our neighbouring countries. Hence, heeding to the call would mean loss of jobs/dead of businesses to local producers; deprecation of naira; increase in cost of living and overall increase in the country’s trade deficit. A situation which will lead to Lagarde’s refutation, as Nigeria will go begging for loans to safeguard the economy.
These three key policy recommendations would be put further to the government of Nigeria and the resultant/expected effect have been predicted. Though, the country may be in dear need for funds to drive its developmental objectives but the welfare of the people should be given an utmost priority over any bogus policy recommendations from these institutions and the citizens should be vigilant on all policies of the government, as in my view there will birth of new set of economic hitman that will protect the interest of IMF & World Bank to the least while our national and citizenry interest would be put at stake and our economic situation will migrate from bad to worse as it will so poor that worst would be forgotten as an English word.
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