FG is anti-growth but IMF is pro-growth
It is true that the unending poor state of the Nigerian economy originated and continues to flow from the improper management of the Federation Account oil proceeds since the demise of the Bretton Woods system of fixed exchange rates in 1971. It has left the country with a permanently ailing national currency, a low-count economic lifeblood as it were. What has been happening since the 1970s entails explicit and implicit withholding of Federation Account (FA) dollar allocations by the CBN. The apex bank then simultaneously substitutes in their place prorata fiat printed naira funds for budgetary spending by the three tiers of government.
While the FA dollar earnings should ordinarily be an economic blessing, they become a curse and economic bane as a result of their replacement with freshly printed naira amounts. In a nutshell, the substituted naira funds elevate the incurred fiscal deficit level beyond the usually budgeted safety ceiling of 3.0 per cent of GDP. The resultant excessive fiscal deficit produces excess liquidity and stokes inflationary pressure leading to a permanent volatile macroeconomic environment. High inflation, the persistently falling value of the naira, high lending rates and chronic national economic under-performance are some familiar poisoned fruits borne by the mishandling of FA dollar allocations together with the country’s other forex earnings.
Although Keynes reportedly said, “In the long run, we are all dead”, the key players responsible for the improper management of public sector oil receipts are alive five decades on (it may be styled befittingly in the long run) to witness the unfolding distressful effects of their mistaken action against the run of economic best practice. Pertinently, two economic analysts including this writer in 2001 noted that the country’s crippling economic difficulties arose from the incorrect handling of the FA dollar allocations and proffered the solution to the then President. However, the CBN Director of Research responded on his behalf on 29/11/2002 (see The Guardian 25-2-2003).
In spite of the fact that it was then 31 years after the ruinous misstep occurred, the director nonetheless donned the air of superiority of the military strongman of yore to the institution where he belonged. He wrote that the CBN did not trust the release of FA dollar allocations to the tiers of government (inclusive of FG!) even in the proposed secure and non-cashable form for proper forex market transaction for fear of the release being “another source of capital flight and a free run on the external reserves (read withheld FA dollar allocations) and the naira exchange rate”. On the contrary, the proffered solution was explicitly meant to prevent such abuse in the first place. Yet, by knowingly mishandling the FA oil proceeds, the CBN lost the ability to fully achieve its five principal objects and run the economy successfully.
Owing to routine claims then by the fiscal and monetary authorities that the IMF/World Bank supported their policy measures, this writer in 2006 challenged the World Bank on the matter and subsequently secured its agreement “that the proper management of Nigeria’s resources will promote rapid growth and development of the country. On the details of how this should be done, this is fully a decision for the Government of Nigeria and not the World Bank”. The exchange of correspondence was shared with readers of this newspaper on 23-24 June 2014 under the title, “CBN, IMF/World Bank and the economy”.
Despite the deepening mass poverty arising from the long-term implementation of the nonstandard fiscal and monetary procedures at the behest of the ex-military regime, successive top policy makers have smugly entrenched the causative mistaken factor. In the circumstances, fully aware of the age-long propensity of the Nigerian government to neither accept sound recommendations nor do the right thing regarding the economy, the characteristically double-dealing IMF/World Bank, in a rare display of a somewhat-pricked conscience in recent years, have increasingly been stressing how to achieve poverty-reducing growth a little more explicitly than before. That prompting is evident in the April 3 press release and staff report on the IMF 2019 World Bank Spring Meetings in Washington, D.C USA.
During the Spring Meetings, there arose issues which portray the NASS as a negligent full-time legislature and Nigeria’s mass media as less than diligent.Firstly, the World Bank/IMF demanded disclosure of the terms and conditions, volumes and maturity of bilateral loans being contracted with China. And the question arises, on what basis did NASS grant budgetary approval for the various loans weighing on the national treasury?
Secondly, Nigerians learnt at the Spring Meetings that the excess crude account had been drawn down to the last $100 million without recourse to the NASS, the representatives of the people. It was another display of impunity by the administration. It is unacceptable. Thirdly, the IMF as usual called for an end to petrol subsidy, but the Minister of Financial pleaded for time. And to meet the incurred subsidy last year, the NNPC reportedly inflated daily petrol consumption from 25 million litres to 50 million litres. The corporation then deducted cost of the inflated volumes from FA oil export accruals as cost recovery thereby disproportionately and corruptly shortchanging the tiers of government and the Nigerian people.
The over-deduction for cost recovery should be returned. To pay subsidy on petrol per se is a good idea because it is a veritable social protection safety net to a large extent in Nigeria. However, since the payment of petrol subsidy has been turned into an avenue for massive corruption, petrol subsidy should stop. As advocated by the IMF, the FG should invest the funds that would become available when subsidy terminates in building hospitals, roads, schools and supporting education and health for the people and so mitigate medical tourism, reduce brain drain and stem the tide of economic migrants who die in the Sahara and the Mediterranean in their quest to go to Europe.
Fourthly, it re-echoed at the Spring Meetings that the directive principle guiding the Buhari administration is to be left to commit the same mistaken economic policies as its predecessors. But unfortunately Buhari does not have the luxury of his predecessors to continue to claim economic success falsely because Nigeria, under his administration, finally breasted the tape and won the prize of poverty capital of the world. And the World Bank rubbed it in. To continue with the current policies, Nigeria’s projected 2019 GDP growth rate of 2.1 per cent would rank the country among the three least growing economies in Sub-Sahara Africa. It implies negative per capita growth. Effectively, the FG is anti-growth. By 2030, the World Bank cried out, 9 in 10 of the world’s extreme poor people would live in Sub-Sahara Africa, particularly in the most populous and least growing Nigeria.
In a comical twist at the end of April, the National Population Commission rejected the 2019 UN projected population of 201 million for Nigeria but without disclosing what it considers to be the accurate figure. Rather sadly, adjusting the population growth rate is not the solution. Mercifully, at the conclusion of its 2019 Article IV consultation with Nigeria, the IMF yet again recommended that operating a unified market-based naira exchange rate would foster poverty-reducing GDP growth rate. And that is the kernel of the campaign begun by the aforementioned two economic analysts five federal elected-administration tenures ago on these pages on October 18, 2001 in an article titled, “CBN’s longthroat and prostrate economy”.
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