The International Monetary Fund (IMF) has often been criticized over the conditions of its loans which many regard as too intrusive, and believed to compromise the economic and political sovereignty of the receiving countries.
The comments that trailed news of IMF Managing Director Christine Lagarde’s arrival in Nigeria, yesterday, was, therefore, not unexpected. Nigeria is in a dire financial state, with the government planning to borrow to shore up a N2.2 trillion deficit in its 2016 budget. Naturally, a visit of the head of a global lender will bring up ideas.
I just heard with one ear that IMF Boss, Christine Lagarde, is in Abuja “for talks” with President Buhari.
This is very frustrating. No, make that annoying. Very annoying.
I hate mixed messages.
Vice-President Osinbajo has been the populist mouth of the administration. He has been promising poverty-alleviating spending and some quasi-welfare spending on the unemployed and the vulnerable.
This administration’s new budget proposal also features increased spending on education, health, etc.
Then you go and host this market fundamentalist Ayatollah from Washington!
So, Christine Lagarde is going to tell you to travel the path of welfare package for the unemployed and the vulnerable?
She is going to encourage you to spend more on education and health?
No. She will tell you to leave those things to “market forces”.
Then she will tell you that she has loans to help you contend with those market forces.
Then her loans will come with conditionalities. – Pius Adesanmi
These conditionalities, according to Joseph Stiglitz, a winner of the Nobel Prize in economics and former chief economist of the World Bank, are not just the typical requirements that anyone lending money might expect the borrower to fulfill in order to ensure the money will be paid back. “Conditionality’ refers to more forceful conditions, ones that often turn the loan into a policy tool,” says Stiglitz.
Many Africans believe that such forceful conditions have reduced the level of social safety on the continent and worsened labour and environmental standards. The operations of the IMF is very controversial and Lagarde knows this and tries her best to change opinions about the global lender. The former French Finance Minister says she is not in Nigeria to “negotiate a loan with conditionalities”.
The IMF Managing Director, who met Nigeria’s President Muhammadu Buhari on Tuesday said issues including how more efficiency, more transparency, better accountability and enlarging the base of revenue can be used for “a sound budget going forward”, were discussed.
“With a very clear 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 lower for longer,” she told reporters at the State House, Abuja after a closed-door meeting with the president.
According to Lagarde, her recommendations can be achieved by “addressing the medium term necessity of improving competitiveness of Nigeria and yet focusing on the short term fiscal situation, which requires that revenue sources be identified in order to compensate the shortfall resulting by the oil price decline”.
She made no comments on Nigeria’s 2016 budget which has been criticized in some quarters due to the size of the deficit. However, she notes that a team of economists from the IMF is going to visit Nigeria next week for audit and review of the proposed budget, after which they will engage with “government authorities to really assess whether the financing is in place, whether the debt is sustainable, whether the borrowing costs are sensible and what strategy must be put in place in order to address challenges going forward”.
Nigerians like Pius Adesanmi see nothing good in Lagarde’s visit. The implementation of IMF’s Structural Adjustment Program with its austerity measures in the 80’s and early 1990’s easily comes to mind. Naira devaluation, importation restrictions and slash of social spending followed, and for many, it was very traumatic. Weeks after the IMF chief’s visit in 2011, the government announced the removal of subsidy which led to nation-wide protests. Nigerians will be waiting to see what happens this time. Buhari had last week said he does not support weakening the naira and needs to be convinced to agree to devaluation of the local currency. The IMF Managing Director may convince him.
After the naira fell to a record low, owing to a slump in crude prices, the central bank introduced import controls and restricted foreign-exchange trading. Oil accounts for over 90 percent of forex earnings and more than 70 percent of government revenues. Nigeria’s foreign exchange reserves fell by over $5 billion in December to close 2015 at a 10-year low.
But Lagarde says she has good intentions. She noted that she is in Nigeria to discuss the new agenda, objectives and reforms identified by President Buhari and also appreciate the impact they will have on neighbouring countries. To her, there has been a massive democratic change in Nigeria compared to when Dr. Goodluck Jonathan was president.