IMF policies: Phantom menace

[The InfoStrides]

I have read , with unceasing interest, a discourse, in the Daily Triumph of Tuesday 31st January, 2012; entitled "Nigeria thrown into chaos and a state of civil war: The role of IMF", by one Mr. F. William Engdahl. The discourse was enlightening, educative and very impressive. It entails and exposes the negative impacts of the International Monetary Fund (IMF) policies on Nigeria; the policies that have been dooming the economy of the country, instead of booming it. But still the government of the day, under the leadership of President Jonathan has refused to learn from the past mistakes, and still continues  to adopt some of the economic destroyer's policies, as part of its gobbledygook "Transformation Agenda"; hence the administration gobbles and swallows any policy, from "white-man", hook, line and sinker.

The propaganda machine of the West is good at making everyone feel guilty, if he does not accept the new ideas and ideologies created by the rich countries, to give them ever more advantage over the poor ones. Democracy, the free market, a world without borders, liberalism labour rights and child abuse etc, have all been cooked-up in the rich countries and then forced on the poor ones; they all sound great, but somehow, their acceptance by the latter countries, invariably, destabilises and puts them at the mercy of the former ones. Any truly independent country, with genuine and good leadership, whose main goal is the liberation of its masses, will think twice and, critically, look at the policies of IMF before it subjects itself to such egocentric policies; I am not an economist and I stand to be corrected. I feel that I owe my country a duty to comment on the discourse/policies.

Nigeria should have had an approach guided by its basic principle, before accepting the idea of globalisation, in general and, particularly, in the financial crisis; the pace of globalistion, in Nigeria, must at-least be  on Nigeria's terms; based on its circumstances and priorities. It might not be, always, possible of course, but it is crucial to ensure that everybody benefits; both the Nigerians and foreign investors. What could be termed as a step by step approach is always important to avoid excesses and problems associated with all new ideas, principles or processes including globalisation. Nigerian leaders should, always, be pragmatic and flexible, not dogmatic in pursuing any policy, brought about by the West. Globalisation or any Western policy should not be seen as an end in itself, but as a mean to an end, which is a better life for our people and our genuine freedom from foreign domination.

Just as  absolute freedom leads to anarchy, so could absolute globalisation lead to chaos and disorder. The industrial countries took more than a century to reach their present stage of development before they propose to adopt globalisation and liberalisation. It would be very unfair to expect developing or under-developed countries to liberalise and do away with their borders at the same instant developed countries do.

IMF policy recipe failed in many African countries, Nigeria inclusive. The basic problem, of course, could be that the IMF misdiagnosed the problem in Africa, and applied the same remedies that were used in Latin America. Because of its background and expertise, the IMF tends to look at macroeconomic variables, and miss out the crucial details in the economic crisis country. This led to policies that were not suitable for the problem at hand. From the beginning the IMF viewed the economic crisis as a small and temporary problem. It did not believe the information, on the ground, of the size of hedge funds, their staying power and their unlimited greed. Consequently, the IMF underestimated the duration and depth of the currency depreciation.

The crisis, in the affected countries, also worsened because the IMF is, principally, concerned with repayments of debts, imprudently, made by commercial banks to the countries concerned. The IMF programmes, also, did not take into consideration, the specific conditions in individual crisis countries, such as the foreign borrowing of both the Governments and private sectors. Consequently, the IMF recommendations of higher interest rates, simply, weakened the capacity to repay loans by the viability of the indebted businesses and the Governments. The IMF, also, underestimated the impacts of its recommendations on the financial system. Forced closure of banks led to  loss of confidence in the surviving banks and the break-down of the intermediation system. Similarly, policies that arbitrarily removed monopolies and subsidies in the existing economic system led to higher costs and the break-down of the distribution system. As a result inflation soared to levels beyond what was warranted by currency depreciation. Another error in judgement by the IMF was the lack of understanding of the close links between foreign exchange and stock markets, which can reinforce each other in depreciating the exchange rate and depress the value of stock prices. The decline in stock prices made debtors of previously healthy companies' and investors' non performing loans (NPL ) increased, and the surviving banks began to fail. Market capitalisation shrank to a fraction of its original value, resulting in a real loss, as margin calls, on loans, could not be met; further increasing the percentage of NPLs. The IMF, also, shorten from six months, to three months, the period of declaring loans as non-performing. The effect on business and banks was disastrous.

The IMF's principal objective has, always, been to prise open the beleaguered country's market, so that foreign companies could take over local businesses.The raid, by foreign predators, are made costly because the pull-out of short term capital from the stock market lowers the prices of shares to rock-bottom level. Some countries, particularly Asian, resisted, but others, Nigeria inclusive, have now lost their good companies. Privatisation was encouraged by the IMF because locals were unable to participate, and foreigners could pick the choicest items.

Nigeria is, widely, acknowledged, to be rich in human and natural resources, yet Nigerians are amongst the poorest people in the world, because of the negative impacts of IMF policies; misguided policies that caused the collapse of the country's economy. Nigeria has the potential to join the ranks of highly regarded and respected nations, but the seed of instability and lack of national cohesion are, simultaneously, inherent in the structure and diversity of the country.

It is high time that we, particularly the developing/underdeveloped countries, recognised that we are being led up the garden by the sweet words and promises of new slogans, new systems and new ideologies. We should recognise that we cannot go backwards; we cannot go back to the, centrally, planned economy. But is it necessary that the way forward should be the one shown to us by the rich and the powerful? Cannot the market be free, without its domination by the rich and the powerful? Indeed a free market should be free of domination by the rich and powerful nations.

Our Governments should stop subscribing to the view that IMF policies are infallible, because IMF policies have never been perfect, and have a strong tendency to over-react and to be subjected to manipulations. We have a bright future if we take steps to redress the situation. Nigeria is endowed with so much; so we should be in the position to see to the success of our country. We should not allow our country to be a prey for the foreign predators.

As already mentioned, earlier above, I am not an economist, so the foregoing was neither intended to be exhaustive analysis, appraisal of the situation nor is it intended to pre-empt economic experts. The comment is intended to stimulate thoughts and discussions. Nigerians have been wishing the country "goodluck", and God so kind, the country is opportuned to have one; goodluck without good planning. So I have ceased wishing Nigeria a goodluck, since the one she has now, has failed her.

I wish my country and compatriots, best of luck.

Submitted by: Ibrahim Idris