World Bank and IMF: Siamese twins of imperialism?

Recently, the World Bank and International Monetary Fund (IMF) have been in the news arguably for the wrong reason. According to these institutions, the economic reforms being carried out by Nigeria’s economic managers will bear fruit in the next 15 years. This is a comment made at a time when the immediate impact of the reform is hunger, hardship, rising inflation especially food inflation with its threat of malnutrition to a poverty stricken people. 

Any well meaning Nigerian will agree that any institution or person telling Nigerians to wait for fifteen years for the economy to stabilise under the present miserable situation is an enemy of progress. 

Make no mistake about it, the twins, World Bank and IMF are agents of imperialism, to impoverish third world countries. Many economic analysis believe that their economic package proposed to revamp the economy of third world countries is a re-introduction of Trans Atlantic slave trade that was abolished worldwide in 1807 after 250 years.

Yes, this time around instead of trafficking in human beings, they capture people government who strayed to approach them for loan and foist their economic model which is a mismatch of the structure of the third world economies. Any economic model developed around a formal economy but being implemented in an informal economy is dead on arrival. In this connection, Nigeria’s economic managers must put on their thinking cap and think through this point. 

The institutions were formed because private lenders could not sustain the world economy. The leading nations of the world at the time (except the then Soviet Russia by her choice) came together at Bretton Woods, New Hampshire in 1944 to form the International Bank For Reconstruction And Development (the world bank) and its sister institution, the International Monetary Fund (IMF). 
As the name implies, the world bank was formed to provide loans for reconstruction and development. On the other hand, the IMF is concerned with short term credit and co-operative management of exchange rate. Management of exchange rate is the tool they use to ruin the economy of third world economies, including Nigeria.

They ask countries without well developed financial markets to float exchange rate and devalue their currency and subject exchange rate determination to forces of demand and supply. This is so even when they know that the supply of U.S. dollar is limited. They also require borrowers to remove subsidies on essential commodities. 

They are enemies because while they demand Third World countries to remove subsidies, the developed world that borrow from these institutions retain subsidies especially on energy and agriculture. There is hunger in Nigeria because removal of subsidies and floating exchange rate ushered in an era of imported inflation in Nigeria which is an import dependent country. There is inflation because Nigerian Economy runs on diesel and premium motor spirit. Agriculture and agriculture value chain is not spared. 

On exchange rate, Bretton Woods Agreement made the U.S. dollar a key currency in terms of which international trade and finance were carried on. Private government reserves were kept largely in the form of U.S. Dollar balances (that is, in cash, bank deposit, and liquid short term securities). It is worthy of note that before 1914, the British Pound had been the king currency but by 1945, the U.S. dollar was established as the key currency.  

Thus to survive in the world of commerce, every country must earn U.S. dollar or convert their home currency to U.S. dollar to boost their foreign reserves. To be credit worthy, each country must have enough foreign reserves to pay for at least 90 days import bill. Nigeria’s economy is struggling because it is an import dependent economy. IMF and World Bank are our enemies because the economic model they are forcing Nigeria to adopt is not compatible with the structure of Nigeria’s economic landscape.

That was what economic managers under General Sanni Abacha saw and advised his government to call off the bluff of IMF and World Bank. He turned back on the Bretton Woods Institutions. He defied their economic criteria for exchange rate determination and fixed exchange rate at N87/$ through out his regime.

Did heaven fall? No! Did IMF and World Bank start proceedings in the World Court to wind up Nigeria? No! Why is Bola Ahmed Tinubu’s government embarrassing their policies line, hook and sinker and surrendering Nigerian sovereignty to these agents of imperialism? Does Bola Ahmed Tinubu government not know that there is a political element in exchange rate determination?

Check it out, no country in the world subjects the exchange rate of her currency, which is the symbol of their sovereignty to be determined 100 per cent by forces of demand and supply (floating the currency). Doing so amounts to leaving exchange rate determination to currency speculators (aboki fx) that in Nigeria, demand for dollar will always exceed supply and will always leave the currency exchange rate to slide .

It’s a shame that CBN is drawing it’s official exchange rate from what it is in the
illegal market. Every responsible government allows her currency exchange rate to be within what is in the best interest of the country. This is where the CBN comes in. 

The Central Bank of Nigeria (CBN ) has the statutory function of issuing the naira and managing the circulation of the naira. It also manages the exchange of foreign currencies with naira. In that wise, Naira notes or any foreign currency note by convention is not a trade able commodity.

That is, the naira note or dollar note is not a commodity to be bought and sold like “Mallams” are doing. Foreign exchange transactions ought to be done through bank accounts. That is why it is called “black market.” It is an illegal market but the CBN has given an approval to this illegal market. What do you expect when stockbrokers and not core economists or core bankers are economic managers? 

Go and verify, Prof Charles Soludo, a sound economist knew what I am talking about black market being an illegal market. During his regime as CBN governor, all these “Mallams” hawking dollar on the streets were arrested, but their sponsors who are powerful people in government blocked their being prosecuted in regular courts.

His efforts to arrest them reflected in the spread between the parallel market rate and the official rate. Roundtrip became impossible as the spread narrowed down to just N1.00 at a point. If I can buy dollar from official sources at a rate that is N1 less from the parallel market rate, why should I go there and risk losing my hard earned money? That is CBN in action. 

Professor Soludo effectively killed the black market. Unfortunately, his successor in office, Sanusi Lamido Sanusi discontinued with the Soludo policy. He reversed the policy and created a wide gap between official exchange rate and the parallel market rate.

The point I am making is that we don’t need IMF and World Bank to give us a template for foreign currency management. This can be done against the background of the structure of the Nigerian Economy. 
Enyinnaya is a Fellow, Chartered Institute of Bankers. He can be reached via: 
[email protected]