When IMF Chief Called Second Time

International Monetary Fund (IMF) Managing Director Christine Lagarde with Nigeria's President Muhammadu Buhari in Abuja, Nigeria, January 5, 2016 REUTERS/Afolabi Sotunde
Sanya Adejokun
In December 2011, Managing Director of the International Monetary Fund (IMF) Chirstine Lagarde visited Nigeria. It was the year that she replaced her compatriot Dominique Strauss-Kahn who was disgraced from office following various sex scandals in the United States and France. It was also the year that Dr. Goodluck Jonathan was substantively voted into office as Nigeria’s president after first acting and then sworn in to complete the term of Umar Yar’Adua who died after a protracted illness. She left shortly before Christmas. In the afternoon of January 1, 2012, Jonathan increased pump price of premium motor spirit (pms) from N65 to N135 per litre.
That experience probably informed the widespread suspicion and scepticism that greeted the second coming of Lagarde in the early days of 2016. Coming at a time when many foreign media, governments and organisations are lamenting the decision of Central Bank of Nigeria (CBN) to severely restrict official supply of foreign currencies because of fall in crude oil prices, which formed over 75 percent of foreign earnings. As one of the two flagships of capitalism, IMF promotes trade liberalisation, and increased taxes especially in poor and developing nations.
It is therefore no wonder that this second visit which lasted from 4th to 7th January generated fears, opposition and criticism amongst workers’ unions and leftists. As soon as she arrived Abuja, conspiracy theories began to circulate with some saying it was to finalise a proposed loan package and others arguing that the purpose of the visit was to ensure that fuel subsidy was removed and taxes increased. Yet other believe it had to do with foreign exchange restrictions.
The Trade Union Congress of Nigeria (TUC) for instance advised Buhari to beware.  “We say this in view of media reports of Monday’s arrival at Abuja of Managing Director of the Fund, Ms Christine Lagarde, for a four-day working visit during which she is scheduled to meet President Muhammadu Buhari to discuss some of the challenges facing the nation’s economy. This warning is informed by our bitter past experience with the financial body. Our country is already in dire state and cannot cope with the IMF’s characteristic shylock conditionalities attached to its credit facilities, and must not accept same if that is what the visit is about.
“For the umpteenth time, we wonder aloud:  Can’t we solve our challenges as a nation without foreign intervention? Must the Bretton wood institutions be the ones to always determine and tell us when our economy is doing well and when to devalue the naira? Why must they suggest to us how our economy can be fixed, whereas their recipe has consistently tended to end up impoverishing more Nigerians than ever before?  Why has it become so difficult to produce good and quality rice and other local products for domestic and export needs?  Since when did it become rocket science for our once functional refineries to produce at more than 30 percent of installed capacity and make petroleum products available? Etc.
“Instances abound of countries that were hitherto nowhere in terms of development in the 1970s/80s but have successfully transformed into giants and premium net exporters of goods and services. Instead of exploring its other natural resources, our country has stayed glued to its blasé identity as a monocultural oil-based economy. Conversely India, China, Malaysia, South Africa, Indonesia, etc. are all doing well today because they looked inward to all their potentials.  Meanwhile the biggest buyer of our oil, the United States, has become a large exporter of the same product, clogging the market and causing our economy to gasp for air.
“We are hard pressed to believe that the IMF chief’s visit is a mere courtesy call.  True to the traditions of her organisation, she would definitely look to dabble and meddle in our fiscal and monetary challenges and seek to sell our government another of their portage of self-serving, ill-adaptable theories and policies that are sure to further impact negatively on the country’s revenue and increase the pressure on the naira in the foreign exchange market. While we are not averse to genuine mutually beneficial partnership with the Fund or any other body, we shall fight any agenda inimical to the economic and other interests of the Nigerian masses.
“The proposed meeting with President Buhari should yield improvements in our business environment, promote opportunities for growth in the private sector, accelerate job creation and strengthen social cohesion. Policies that do not work for the country should not be embraced. Additionally, we advocate re-negotiation of our current loans in the light of the burden that debt-servicing constitutes to our budget, which is about 23 percent of the total budget. Lastly, the Congress warns that no devaluation of the naira should be countenanced unless the percentage of devaluation is equivalent to the percentage increase in the national minimum wage. Nothing less will suffice.”
Also, businessman and media entrepreneur, Mr. Jimoh Ibrahim enjoined “President Buhari to learn from Ibrahim Badamosi Babagida’s pitfall when he handed over the economy to IMF by taking specific loan only for the economy to be destroyed with IMF’s painful colonial conditionalities,” Ibrahim said. “The government of IBB was simply put to an end in economic terms by the Structural Adjustment Programme, an IMF baby which remains the foundation of Nigeria’s problem.” He also describes the statement made by IMF boss as uncalled for and a waste of time. Ibrahim said: “For IMF to advise Nigeria not to be rigid in Economy Policy is an indirect way of asking for devaluation of naira and campaigning for ‘about to come’ IMF conditionalities, knowing very well that Nigeria may ask for assistance.”
Aware of these biases, Lagarde shortly after meeting with President Buhari tried to calm nerves by explaining that her mission to Nigeria was only to give policy advise ranging from fiscal discipline, flexible monetary policies and need to ensure that these policies do not bring hardship to Nigerians. She said her visit to Nigeria has nothing to do with loans’ negotiation for the Federal Government.
“First, let me make it clear that I’m not here, nor is my team in this country, to negotiate a loan with conditionalities. We are not into programme negotiations. And frankly, at this point in time, given the determination and resilience displayed by the President and his team, I don’t see why an IMF programme will be needed. Of course, discipline is going to be needed. So, implementation is going to be key for the objectives and the ambitions to serve the country well, in order for it to be actually sustainable. On the current account upfront, we believe that with very clear primary ambition to support the poor people of Nigeria, there could be added flexibility in the monetary policy, particularly if, as we think, the price of oil is likely to be possibly low for longer, because clearly the authorities should not deplete the reserves of the country, simply because of rules that will be exceedingly rigid. I’m not suggesting that rigidity be totally removed but some degree of flexibility will be enough.”
She also debunked beliefs in some quarters that IMF’s policies are not pro-people and against the poor saying “Certainly, the last four and a half years, since I have been Managing Director of this institution, this is not the recipes we adopted and this is certainly not the feedback I have received from the countries that we have worked with. “I just want to point out that we are majorly involved in three kinds of activities. The first one, which is the most traditional one, is under which we give policy advice to our members. We have currently 188 countries that are under this institution and it is our duty and accountability to them to review their economy every year to give them report about their economy. We don’t push them. We don’t do things necessarily to please them. We say things as we see them.
“The second activity which is the fastest growing one in the institution is technical assistance and capacity building, and there is plenty of that available to all the countries of the world. It gives us pride to see that about 150 countries have had the benefit of technical assistance and capacity building. We have discussed that with the Minister of Finance together with their team and we would be happy to provide more technical assistance and capacity building. You need a strong tax department; you need a strong debt management and you need a strong custom authority in order to achieve a strong economy for the country. The third activity is the lending that we provide because nobody else is ready to provide lending for the country. When the balance is in a very bad situation and when there are no finances available, at that point in time in order to pull the country out of the very difficult situation it is in, we come in and we lend. But, we do that because it is the entire international community’s monies.
It is not my money. It is the international community’s money and we do so with the right guarantees stepping into international community bonds, which is that the economy is going to be improved, that fiscal discipline is going to be brought in, that corruption is going to be punished. We don’t do as much now as we did four years ago because the situation has improved.
According to Mrs. Lagarde, “these reform agendas that have been identified are also to appreciate the impact that it will have on neighbouring countries, because when you have a very large economy like Nigeria, anything that it decides, any hardship that it faces, would actually have consequences around it. That is certainly what our research and analytical work is demonstrating. Nigeria is one of those that actually have impact not just on itself and its people, but also around it and its neighbours.”
Furthermore, the revelation that some economist from the IMF will visit Nigeria to discuss the budget and possibly review it has further heightened the fear that Ms. Lagarde’s visit may have ulterior reasons beyond the mitigation of the dwindling global oil prices. In fact, Ms. Lagarde also revealed that the Nigerian government’s decision to restrict foreign exchange, a move that has affected millions of citizens, should only be a temporary economic step when she met members of the Nigerian Senate. According to The IMF chief, “additional exchange rate flexibility can help soften the impact of external shocks, make output and employment less volatile, and help build external reserves,” she advised. “It can also help avoid the need for costly foreign exchange restrictions – which should, in any case, remain temporary.” There is no doubt that the foreign exchange restrictions encourage exportation over importation of some products and this may have adverse effects on the IMF nations.
During his meeting with the IMF chief, President Muhammadu Buhari said “We have just come out of budget discussions after many weeks of taking into consideration the many needs of the country, and the down turn of the economy with falling oil prices and the negative economic forecasts. We are working very hard and with the budget as our way forward, we will do our best to ensure that our country survives the current economic downturn. We have also told all heads of Ministries, Departments and Agencies of government that on our watch, they will fully account for all funds that get into their coffers.”
The President said the Federal Government was reviewing its operational costs and had directed all the Ministries, Departments and Agencies to cut down on their overhead costs adding that the Federal Government will welcome the technical support and expertise of the IMF for its plans to diversify the Nigerian economy and further unleash its growth potentials.

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