International Monetary Fund and Crisis Of Development In Nigeria

Introduction

Despite efforts evolved in the past to tame the tide of underdevelopment, the post-colonial Nigerian state has continued to be enmeshed in development crisis. Available statistics from the Debt Management Office, Central Bank of Nigeria and National Bureau of Statistics indicate that the country is plunged into deep economic crisis. For instance, the information released by the Debt Management Office shows that while the total debt profile of Nigeria stood at 3.1 billion dollars in 2007, it has risen dramatically to an astronomical level of $5.3 billion in 2014. Similarly, the official reports of the Central Bank of Nigeria indicate that the inflation rate has progressed from 6.9% in 2000, 18.9% in 2001, 14% in 2003, 11.6% in 2008 and 13.7% in 2010. In the same vein, data generated from the National Bureau of Statistics shows that unemployment and poverty rates have witnessed unimaginable growth within the period of the study. As a result, Savas (2007) posited that the Sub-Saharan Africa, which Nigeria is part of, is the only region in the world where the proportion of the poor has been rising over time and where the poor are relatively worse off than their counterparts in other parts of the world. In the same vein, SESRTCIC (2007) observed that the development challenges facing sub-Saharan Africa can be described by variety of poverty and inequality measures through time or in comparison with other nations or regions of the world. He pointed that on the average, 45 percent of the Sub-Saharan Africa’s 726 million people live below the international poverty line of US 1 dollar a day.

The International Monetary Fund (IMF) is one among other International Financial Institutions. The decision to establish the IMF was made during a United Nations Conference that held in Bretton Woods New Hampshire, (USA).

These world and regional groupings have had different interpretation and analysis by different scholars and world observers. To some, these groups formations exist for the purpose of aiding world development; while to others, it is for the purpose of the richer and more advanced economies ruling over the poorer and less developed or developing ones, in the form of neo-colonialism and imperialism.

The circumstances in the world economy then necessitated its formation. It was founded towards the end of World War II in order to pioneer a multilateral financial Institutions’ framework for trade and finance that would help countries avoid the failings that has characterized the interwar period of 1920s and 1930s. Government had drifted toward autarchy (economic independence as a national policy) and had implemented ‘beggar thy neighbour’ policies in effort to gain a competitive edge over other countries. There was also present a proliferation PF preferential bilateral and regional trading arrangements, which undermined multilateral trade many countries had also restricted the international convertibility of their currencies as a means of stabilizing and limiting capital movement.

Purpose for which IMF was established:

International Monetary Fund was formed to promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problem. Also to facilitate the expansion and balanced growth of international trade and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives to economic policy. Lastly, IMF gives confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards, this providing them with opportunity to correct Mal-adjustments in their balance of payments without resorting to measures destructive of natural or international prosperity, among others.

How does the IMF derive its financial resources, you may want to ask? The Fund derives its financial resources from members’ quotas, borrowings, its operations in gold, and its own income. But the members’ quotas are the main sources of its resources. Hence, it is your contributions that come back to you as financial bailout or loans. Members’ quotas are the financial obligations that countries make to the IMF when they join the IMF.  Each member is assigned a quota when it joins the IMF. It is determined according to the “Bretton Woods” formula that takes into account the relative size and importance of the country’s economy to the global economy. 

IMF basic functions:

International Monetary Fund performs three basic functions of advising member states on policies and global surveillance, rendering financial assistants and providing training and technical assistance.

IMF also promotes global liquidity in the level and composition of its members’ foreign exchange reserves and their access to capital accounts for the members meeting their trade and international payments requirement. The members draw from the General Arrangement Borrow (GAB) and New Arrangement to Borrow (NAB) facilities under this functions.

The Fund also promotes capital account convertibility of member countries by ensuring orderly liberalization of capital movements due to their benefit to their world economy. From the performance of its functions, the IMF has made quite giant strides in resolving its member countries’ economic, financial system growth and poverty problems, among others. Most notably:

Poverty Reduction Strategy Programme; this has been widely spread across the developing economies and those economies in transition.

Heavily Indebted Poor Countries (HIPCs) Initiative: the IMF, in collaboration with the World Bank, has adopted the HIPCs Initiative by forgiving and canceling the external debts of a member of countries that are categorized as heavily indebted poor countries. The amount so forgiven was to be redirected into the internal economic development of the concerned economies.

New Partnership for Africa’s Development (NEPAD) Support and Sponsorship, among other Regional Integrations. The IMF has encouraged and sponsored the African leader’s initiative to take their developmental destiny into their hands. This is, in a sense, promoting good governance within the African Sub-Region economies.

Regional Training and Technical Assistance: The IMF has trained a number of the citizens of member countries in order to contribute more effectively to poor and development issues of their home countries. A number of centers across the world have been established by IMF to foster this assistance.

Clarifications of Some Basic Concepts

Deregulation
Deregulation is one of the economic prescriptions enshrined in the Washington Consensus, and also a major conditionality for accessing loans from the International Financial Institutions like the International Monetary Fund and World Bank. Over the years, African scholarship has been grappling with the challenge of assigning a suitable definition to the concept of deregulation. The situation was basically influenced by three developments. Firstly, there has been a tendency by scholars to assign peripheral or superficial meaning to the concept of deregulation. In this case, they attempt to define deregulation by using terms like deregulate, decontrol or rather state that deregulation is the direct antonym of regulation (see Ojo, 2010 and Wikipedia, 2011). Secondly, others have avoided the usage of the term and rather prefer to employ privatization and liberalization to denote deregulation. Thirdly and lastly, scholars have used deregulation and privatization interchangeably (Dappa & Daminabo, 2011; Kalejaiye et al., 2013).
However, scholars like Olashore (1991), Winston (1993), Bannock et al., (1999), Adegbemile (2007), Ajayi & Ekundayo (2008), Owojori (2011), Eme & Onwuka (2011), Kuye (2012) provided the framework for distinguishing deregulation from the concept of privatization.

Deregulation is a crucial aspect towards the liberalization of an economy. Deregulation is a systematic and deliberate activity wherein government through legislation withdraws its regulatory role of determining what is to be produced, when it is produced, how it is to be produced and how it is distributed in the state, thereby allowing the forces of demand and supply to play this vital role in an economy. Deregulation has to do with the whole
gamut of policies that deal with the removal of government controls or restrictions either in one sector or all the sectors of an economy.
The sectors of an economy include financial, transportation, communication, energy, utilities etc. Deregulation generally takes place either at the sectoral or
multi-sectoral level. For instance, the transportation sectors of an economy consist of rail, land and air while the financial sectors of an economy are banking and insurance. Meanwhile, the transfer of government asset to private individual for management and control which is done at sub-sector level connotes privatization.

This brings us to the distinguishing and fundamental difference between deregulation and privatization. While deregulation takes place at sectoral level, privatization is an activity that takes place at sub-sector segment of an economy. Privatization can only take place in a deregulated economy. Deregulation opens door for privatization; hence, without deregulation, they cannot be privatization. From the analysis, we have established the interconnectivity between deregulation and privatization with minor differences that exist between the two.

Trade Liberalization

Liberalization of Trade or Trade Openness has been at the centre of the discussion of development policy in recent time (Anh Tung, 2015). Trade liberalization, which
is sometimes associated with concepts like trade openness, free trade, laissez faire, economic liberalism among others sharply contrast with mercantilism, economic nationalism or protectionism. While the former advocates for unregulated and uninterrupted movement of goods and services within the global system, the latter strongly argue for the application of restrictive measures to limit free flow of trades between States. Wide ranges of definitions have been given to the concept of trade liberalization. For instance, Investopedia conceptualized trade liberalization as the removal or reduction of restrictions or barriers on the free exchange of goods between nations. This includes the removal or reduction of both tariff (duties and surcharges) and nontariff obstacles like licensing rules, quotas and other requirementst/tradeliberalization). Similarly, trade liberalization is seen as the removal of or reduction in the trade practices that thwart free flow of goods and services from one nation to another. It includes dismantling of tariff (such as duties, surcharges, and export subsidies) as well as nontariff barriers (such as licensing regulations, quotas, and arbitrary standards).

Human Development Index

The Human Development Index (HDI) is an annual index published by the United Nation Development Program. It list countries in order of human achievement and ranks human development by certain developmental criteria. It uses three dimensions and four indicators to measure the dimensions. These are of life expectancy, education and per capita income indicators, which are used to rank countries into four tiers of development.

It is equally seen as a summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and have a decent standard of living. The HDI is the geometric mean of normalized indices for each of the three dimensions The health dimension assessed by life expectancy at birth component of the HDI is calculated using a minimum value of 20 years and maximum value of 85 years. The education component of the HDI is measured by mean of years of schooling for adults aged 25 years and expected years of schooling for children of school entering age. Mean years of schooling is estimated by UNESCO Institute for Statistics based on educational attainment data from censuses and surveys available in its database. Expected years of schooling estimates are based on enrolment by age at all levels of education. This indicator is produced by UNESCO Institute for Statistics. An expected year of schooling is capped at 18 years. The indicators are normalized using a minimum value of zero and maximum aspirational values of 15 and 18 years respectively. The two indices are combined into an education index using
arithmetic mean. The standard of living dimension is measured by gross national income per capita. The goalpost for minimum income is $100 (PPP) and the maximum is $75,000 (PPP). The minimum value for GNI per capita, set at $100, is justified by the considerable amount of unmeasured subsistence and nonmarket production in economies close to the minimum that is not captured in the official data. The HDI uses the logarithm of income, to reflect the diminishing importance of income with increasing GNI. The scores for the three HDI dimension indices are then aggregated into a composite index using geometric mean.

Unemployment
Conceptually, unemployment connotes a situation in which people who are eminently qualified based on age, educational standard and willing to work are unable to find work at a prevailing wage (ILO, 1982; Gbosi, 1997). Stressing further, World Bank (1998) observed that the unemployed is a member of an economically active population, who are without work but available and
seeking, including people who have lost their jobs and those who voluntarily left work. Arising from the above elucidation is the fact that every population of a country is divided into two categories; the economically active and the economically inactive. The economically active refers to the labour force or better still, the working population who are willing and able to work, including those actively engaged in the production of goods and services (employed) and those
who are unemployed. Whereas, unemployed refers to people who are willing and capable of work but are unable to find suitable paid employment. However, the economically inactive refers to people who are neither working nor looking for jobs. Examples are the housewives, full time students and those below the legal age for work, old and retired persons. The unemployment rate can be expressed as a percentage of the total number of persons available for employment at any given time. Thus: Unemployment rate = Unemployed Workers/Total Workers.

IMF-Nigeria Relations in Retrospect

Ever since Nigeria achieved the status of self government, the country has continued to embark on economic reforms which were normally influenced by the prevailing economic situation and circumstance. The two contending approaches (economic nationalism and economic liberalism) have always provided the ideological underpinning, basis, guideline and direction for the structural transformation of Nigeria’s economy at any particular time. In this context, we argue that the country has been guided by the philosophical disposition of either economic nationalism or economic liberalism. While economic nationalism favours government intervention and control of the economy, the economic liberalism espouses the marketization or liberalization of the economy.

At independence up till early 1970s, the country embraced economic nationalistic principles with agriculture as the mainstay of the economy. As noted by Dappa & Daminabo (2011): “during this period, manufacturing and mining activities were at a very low level of development. The country’s participation in the external trade was based on the level of economic activities in agriculture. Thus, agricultural commodities dominated the country’s export trade while manufactured items dominated imports”.

However, the boost in the economic revenue of Nigeria arising from the oil boom of 1973/74 altered the economic activities of the country as government channeled the burgeoning revenue to infrastructural, capital, human and public sector development. This era can best be described as the golden era of Nigeria (Ovaga, 2010).

Consequently, the drastic decline in the revenue of Nigeria occasioned by the oil glut in the international market exposed the country to economic recession which nearly led to the collapse of her economy. This ugly development and the urgent need to address this situation culminated into the adoption of the neoliberal economic framework as articulated in the Washington and PostWashington Consensus and propagated by the International Financial Institutions. This was possible through the Stabilization Act of 1982, budget-tightening measure of 1984 and finally the Structural Adjustment Programme (SAP) of 1986. The infiltration of Nigeria’s economy by the International Monetary led to the implementation of different policy reforms like removal of government subsidies, trade liberalization, deregulation and privatization of public enterprises among numerous others. The implementation of the aforementioned policy reforms were among the conditionalities for accessing financial and technical assistance from the International Monetary.

With the return to democracy in 1999, the then President Obasanjo reverted to the neo-liberal economic agenda cum prescriptions of IMF, which was subtly meant to give international credibility and acceptance to his authoritarian government. The neo-liberal prescriptions were articulated under the blueprint of the National Economic Empowerment Development Strategy (NEEDS). The National Economic Empowerment Development Strategy is a coherent strategic framework designed to usher Nigeria into the path of sustainable economic development through the pursuit of market-oriented reforms. From 1999 till date, Nigeria’s economic path has been under the tutelage and direction of the IMF.

New Phase of IMF Reforms in Nigeria, 1999-2014

Undoubtedly, the historical antecedence of IMF reforms in Nigeria can be traced to the Babangida regime of 1980s when the administration adopted and implemented the Structural Adjustment Programme. However, the emergence of a democratically elected government of the then President Olusegun Obasanjo in
1999 opened a new phase in the IMF-Nigeria relation. This new relation facilitated the implementations of various neo-economic liberal policies of the International Monetary Fund, which was coordinated under through the National Economic Empowerment and Development Strategy (NEEDS) agenda (Okonkwo, 2014).

The NEEDS according to the initiators represent a sound and home grown development strategy saddled with the responsibility of achieving four cardinal objectives which are: wealth creation, employment generation, poverty reduction and value re-orientation through reform of government institution, development of the public sector, implementation of social charter etc (NEEDS, 2004). However, the key elements of public sector development in the NEEDS strategy include the renewed privatization, de-regulation and trade liberalization programme which were basically designed to deemphasize the role of the state in the economic activities of the country and rather allow the forces of demand and supply to play this pivotal role (NEEDS, 2004).

However, to us, NEEDS framework is deliberate agenda of the Metropolitans to foist and extend their capitalist ideology on Nigeria. NEEDS development strategy is another edition of the failed Structural Adjustment Programme and a new form of Western imperialism designed to perpetuate their dominance and also distort the economic development of Nigeria. without the usual altercation been exhibited by the media, pressure groups and civil society organizations; the respective governments in power drafted bills and submitted to the National Assembly. The Bills which were subsequently passed into laws, formed the basis for the institutionalization of deregulation reforms in Nigeria. The Public Enterprise Act 1999 CAP. P38 L.F.N. 2004, Telecommunication Act No. 19 of 2003 CAP No.23 L.F.N. 2004 and Electric Power Sector Reform Act, No. 6 of 2005 were among the extant laws that gave impetus to the adoption and implementation of deregulation policy in the telecommunication and power sectors of Nigeria economy.

Clearly, the core proponents of deregulation reform have argued and maintained that a deregulated economy has the capacity to: improve services, eradicate misuse of monopoly powers, attract local & foreign investment, encourage innovation and introduce advanced services, generate government revenues, increase sector efficiency through competition and extend services to underserved and unserved areas (Ndukwe, 2005). The whole essence of the deregulation process as maintained by the apologists is the enhancement and sustainability of economic growth and development in a state.

However, available data of the Nigerian economy in the post-deregulation reforms in power and telecommunication sectors indicated relative success in certain areas while others recorded abysmal failure. For instance, the post deregulation survey showed that the telecom’s contribution to Nigeria’s GDP rose from 0.62% in 2001 to 8.38% in 2014 while Nigeria’s subscribers/teledensity increased from 400,000 in 1999 to 139, 143, 610 in 2014. Also, the number of Nigerians employed in the telecom sector increased from 8,045 in 2011 to 8,449 in 2014 (NCC, 2014; NBS, 2015). On the other hand, minimal result was recorded in the power sector reforms as the 10,000 megawatts targeted in the process
was not realized. Available statistics indicate that the number of megawatts generated in the post-power sector reform increased from 2,226 in 2005 to 3,800 in 2008 though a decline of 2,900 was observed in 2009 while it stood at 3,666.76 in 2014 (Federal Ministry of Power, 2014; NBS, 2015).

The costs of trade liberalization

According to the IMF and World Bank, one of the sources of Africa's crisis is its inward-looking trade system, characterized by the protection of domestic markets, subsidies, overvalued exchange rates and other "market distortions" that made African exports less "competitive" in world markets. In place of this system, they propose an open and liberal trading system in which tariff and non tariff barriers are kept to a minimum or even eliminated. Such a system, combined with an export-led growth strategy, would put Africa on a solid path to economic recovery, according to both institutions.

The costs associated with trade liberalization have largely offset any potential "benefits" African countries were supposed to derive from that liberalization. First of all, trade liberalization has translated into substantial fiscal losses, since many countries depend on import taxation as their main source of fiscal revenues. Therefore, the elimination of, or reduction in, import tariffs has led to lower government revenues.

But one of the most negative impacts of trade liberalization has been the collapse of many domestic industries, unable to sustain competition from powerful and subsidized competitors from industrialized countries. In fact, Africa's industrial sector has been among the biggest victims of structural adjustment.

From Senegal to Zambia, from Mali to Tanzania, from Cote d'Ivoire to Uganda, entire sectors of the domestic industry have been wiped out, with devastating consequences. Not only has the industrial sector contribution to domestic product continued to fall, but also the industrial workforce has continued to shrink dramatically. In Senegal, more than one third of industrial workers lost their jobs in the 1980s. The trend was accentuated in the 1990s, following sweeping trade liberalization policies and privatization imposed by the IMF and the World Bank, especially after the 50% devaluation of the CFA Franc, in 1994. In Ghana, the industrial workforce declined from 78,700 in 1987 to 28,000 in 1993. In Zambia, in the textile sector alone, more than 75% of workers lost their jobs in less than a decade, as a result of the complete dismantling of that sector by the Chiluba presidency. In other countries, such as Cote d'Ivoire, Burkina Faso, Mali, Togo, Zambia, Tanzania, etc. similar trends can be observed.

In several annual and special reports, the International Labor Organization (ILO) has documented the devastating impact of SAPs on employment and wages. The African Union seems to have come to grips with that devastation. It organized a special Summit on Employment and Poverty, in the capital of Burkina Faso, September 9 and 10, 2004. It was revealed during that Summit that only 25% of the African workforce is employed in the formal sector. The rest, 75%, is either in the subsistence agriculture or in the informal sector. In light of this reality, the Summit issued a Plan of Action aimed at exploring strategies to foster job creation. But such a Plan will only be credible if African countries are ready to move away from IMF and World Bank recipes, which were harshly criticized during the Summit.

UNCTAD has reported that more than 70% of Africa's exports are still composed of primary products, more than 62% of which are non processed products. This helps justify the need for more liberalization and deregulation to make African exports more "competitive". The second objective is to help justify the need for more liberalization and deregulation to make African economies more "competitive" and "attractive" to foreign direct investments. This also explains the push for more privatization.

In the name of "comparative advantage", the export-led growth strategy forces African countries to compete fiercely for market shares, leading them to flood the same markets with more of their commodities. As a result, trade liberalization has accentuated the volatility of African commodities, whose prices experienced twice the volatility of East Asian commodity prices and nearly four times the volatility that industrial countries experienced in the 1970s, 1980s and 1990s. This has contributed to worsening Africa's terms of trade.

According to UNCTAD, if Africa's terms of trade had remained at their 1980 level:

- Africa's share in world trade would have been twice its current level
- the investment ratio would have been raised by 6.0% per annum in non-oil exporting countries
- it would have added to annual growth 1.4% per annum
- it would have raised GDP per capita by at least 50% to $478 in 1997 compared with the actual figure of $323 during that year.

The costs of financial liberalization

One of the main objectives of financial liberalization is to make African countries "attractive" to foreign direct investments. But as the experience of development shows, foreign direct investments follow development, not the other way around. In addition, despite all "the right financial policies", foreign investments continue to elude Africa, with less than 2% of flows to developing countries, despite having among the highest rates of return on investments in the world. And these flows are concentrated in a few oil-producing and mineral-rich countries, according to UNCTAD and the World Bank.

In reality, financial liberalization has yielded little gains. For most African countries, it has been associated with huge costs. First, it entails higher levels of foreign exchange reserves to protect domestic currencies against attacks resulting from speculative short-term capital outflows. Second, financial liberalization has increased the likelihood of capital flight, in part as a result of a greater volatility of domestic currencies. The high costs of trade and financial liberalization further weakened African economies and opened the way to the privatization of the continent.

The privatization of Nigeria in Particular and Africa in General

Privatization, like financial liberalization, is seen by the IMF and World Bank as an instrument to promote private sector development, which has been elevated to the status of "engine of growth". The privatization of State-owned enterprises (SOEs), including water and power utilities, has been one of the core conditionalities imposed by the two institutions, even in the context of "poverty reduction".

Most of the foreign direct investments registered by African countries in the 1990s came as a response to privatization of SOEs. No sector was spared, even those considered as "strategic" in the 1980s, such as telecommunications, energy, water and the extractive industries. In 1994, the World Bank published a report assessing the process of privatization in SSA. After complaining about the slow pace of privatization throughout the region, it issued a warning to African governments to accelerate the dismantling of their public sector, accused of being "at the heart of Africa's economic crisis". The process of privatization peaked in the late 1990s and ever since has leveled off, despite more deregulation, liberalization and all kinds of incentives offered to would be investors.

To date, it is estimated that more than 40,000 SOEs have been sold off in Africa. However, the "gains" from privatization, projected by the World Bank and the IMF, have been elusive. In fact, many privatization schemes have failed and contributed to worsening economic and social conditions. Almost everywhere, privatization has been associated with massive job losses and higher prices of goods and services that put them out of reach of most citizens.

Conclusion
The continued development crises in Nigeria amidst the adoption and implementation of various policy prescriptions of the International Monetary Fund calls for reappraisal nay, initiation of better policy options that would engender genuine development in the country. The experimentation and applicability of the Structural Adjustment Programme of the International Monetary Fund did not offer the best approach out of the Nigeria’s economic
recession in the 1980s. Contemporarily, from the available economic indicators, we can also state that the policy prescriptions of the IMF as articulated in the National Economic Empowerment Development Strategy framework has not offered any meaningful solution to the developmental challenges of Nigeria.
On the basis of the above, the study arrived at the following findings:
i.          That the integration of Nigeria into the global capitalist system through the various policy prescriptions of the International Monetary Fund is a mere ploy of the Western nations to assert their dominance in the international system and also distort the development of Nigeria.
ii.         As a primary producer of commodity subtly allotted to it by the international division of labour, Nigeria cannot achieve any meaningful progress through the implementation of the neo-economic liberal agenda of the International Monetary Fund.
iii. That the policy prescriptions of the International Monetary Fund were foisted on the country without taken cognizance of the peculiarities of Nigerian environment and level of development of the productive forces.
iv. That the idea of pushing for the liberalization is fundamentally to whittle down or vitiate the strength of regional markets, thereby exposing individual states to the monstrous manipulations and dictates of the merchants of imperialism (Okolie, 2015: 76).
v. That despite the much touted economic growth recorded in the country within the period under study, poverty and unemployment still persist and move to an alarming rate. Here, we argue that the mere economic growth indicators of the International Financial Institutions are mere ploy to bamboozle Nigeria in order to rationalize the efficacy of their reforms.