The pains and agonies of the structural adjustment prescriptions took back Africa’s industrialisation by an entire generation, not to talk of the disastrous humanitarian and social consequences in terms of dwindling collective welfare and widespread poverty and immiserisation. On two separate occasions I was offered a job at the World Bank when I was at the verge of completing my doctoral studies. I flatly turned it down each time. Those who made the offers could not believe that anyone in his right mind would turn down an opportunity to work for the most influential banking institution in the world.
You see, I did my undergraduate studies in the then Faculty of Arts and Social Sciences (FASS), probably Nigeria’s leading centre of social radicalism during those good old days. Samora Machel of Mozambique visited our campus and gave a famous speech on African liberation. A good number of us had absolutely no other ambition or career aspiration other than to quickly finish up our studies and join the liberation war in Southern Africa. For us, the World Bank and the IMF were nothing better than agents and forerunners of imperialism.
When I moved to the National Institute for Policy and Strategic Studies (NIPSS) in the early eighties, one of my pioneer projects was to develop a policy paper for the government on agrarian reforms and food security. In my early twenties I toured the country evaluating the World Bank-assisted River Basin Development Projects. I discovered that the federal government had invested billions of dollars of World Bank loans on combined harvesters and other sophisticated agricultural technologies. Nearly all of them were never used. They were left to rust in the tropical sun. Meanwhile, our generation was saddled with the repayment of these loans. At a seminar in Kuru, I was nearly stripped and flogged by the late Prof Francis Idachaba, when I nonchalantly dismissed his Directorate of Food, Roads and Rural Infrastructure (DFRRI) as a “monumental disaster”. We were swaggering intellectuals who, in a manner of speaking, were confident enough to stand up to anyone.
In an age of crisis, when our government could not balance its financial books, the Bretton Woods Institutions came knocking at the door with prescriptions that amounted to a form of geostrategic coercion. Nigeria borrowed a total of about US$15 billion at variable interest from the IMF and World Bank. Within two decades, these loans grew to a staggering $36 billion. And this despite the fact that we were coughing out a huge bill in interest payments. It took the courage, wisdom, and sagacity of the Olusegun Obasanjo administration and the then finance minister, Ngozi Okonjo-Iweala – in her first incarnation – to negotiate an exit from the Paris Club of public creditors. Whilst acting for the governor of the CBN at the time, I personally signed off the first tranche of US$7.5 billion payment to the Paris Club in our bid to exit their iniquitous debt peonage. After the signature, I took the rest of the day off and had to be in bed with tranquilizers. It was a necessary surgery, but a most excruciatingly painful, especially when you have to cough out a staggering US$7.5 billion just to settle a band of vultures in France.
Even after we exited the Paris Club, we had to agree to create the MDGs Office to channel more than N100 billion annually into so-called poverty alleviation programmes. Most of such agencies, as far as I am concerned, amount to a gargantuan waste of public funds which could have been better channelled into education and human capital or to railways, power and infrastructures. One can therefore see why the cognoscenti of Nigerian economics do not think highly of the Washington institutions. Reminiscent of American cowboys in the Wild West, some Nigerians would want to reach for their gun at the mere mention or distant whiff of anything that smacks of the IMF and its sister agencies.
Age and experience have a way of sobering people up. Some of us in our greying years are wise enough to know that it would be sheer folly to throw away the baby with the bathwater. Both the Fund and the Bank have changed dramatically since those odious years of the eighties and nineties. They no longer behave with the astonishing arrogance reminiscent of Roman Proconsuls. They have publicly acknowledged that there were areas in which mistakes were made. They no longer view themselves from the vantage-point of pontifical Infallibility.
Indeed, some of their thought-leaders have come back to understanding the fundamental maxims of economic development as a learning process, in which economic science progresses in the way the 20th century’s greatest philosopher of science Karl Popper understood it, in terms of “conjectures and refutations”. Popper and colleagues such as Paul Feyerabend and Thomas Kuhn underlined verifiability and falsifiability as the epistemic foundation of all knowledge, be it quantum physics or macroeconomics. The economics of development, as everyone now acknowledges, cannot be an exception. Nobody has a monopoly of knowledge – not even the transnational mandarins from Washington.
If the IMF did not exist, it would have had to be invented. The IMF and the World Bank – the Bretton Woods Institutions – were hammered out during the sultry summer of 1944 in the New Hampshire vacation resort of Bretton Woods. The West was still in the maelstrom of war, although the wind was blowing in favour of the Allied powers. The famous debate between the British economist John Maynard Keynes and the American chief negotiator John Montgomery White sealed the fate of Bretton Woods. Keynes wanted to see the emergence of truly international institutions run by professional economists devoid of political interests. To the chagrin of the Americans, he boasted that “they have the money but we have the ideas”. White and the Americans would have none of it. For better or worse, the negotiators settled for an international financial architecture that reflected American interests and its hegemonic ambitions.
These thoughts came back to me as I reflected on the Lagarde visit and its possible outcomes. The IMF boss had a clear message for Nigeria: the party is over. At a time of falling global oil prices – which are projected to become the ‘permanent normal’ – our government must be able to balance the books while diversifying the economy away from dependence on oil. She advised our government to broaden the tax base while blocking leakages that have continued to ensure haemorrhage in our public finances. She particularly underscored the need to raise VAT while removing the oil subsidy and opting in favour of a market-determined exchange rate. Ms. Lagarde also urged our government to strengthen the institutions of policy management while deepening the financial sector and strengthening small-scale and micro-enterprises.
Grosso modo, I see nothing wrong with these prescriptions. They are, by and large, sensible and prudent. Most were, in fact, predictable. She went on and on about what the “investors” would expect. It is familiar talk. The IMF has never pretended to be a development institution. When an elephant is threatening to fall, the hyenas and jackals start hovering in the horizon. We in Nigeria are confronted with enormous economic and financial challenges right now. But the IMF is neither a hyena nor a jackal, of course. But it comes with the same mindset – reminiscent of undertakers that pick an interest in the fate of terminal patients. Given the limitations of her worldview, Ms. Lagarde was incapable of talking about technology, industrialization and innovation. Nobody in Washington will ever encourage an African country to aspire to become a manufacturing industrial-technological power. We would have to do it ourselves.
There have been some significant reforms in the IMF, but they have not been far-reaching enough to assuage critics who see the organization largely as an agency that serves the interests of the Western powers, in particular, the American Department of State and the American Treasury. The entire sub-Saharan region has voting rights lower than those of the Great Britain. Africans are grossly under-represented in the high echelons of the Fund. The World Bank has done far better in comparison.
Like the sun, the IMF will always be there. We shall always need it. The reformed Fund has some important accomplishments which should not be ignored. It has successfully managed the transition from the gold-dollar system of fixed exchange rates to the floating system. We weathered the storms of the sovereign debt crisis of the eighties and nineties. The Fund rose to the occasion after the sub-prime crisis and the Great Recession. Their efforts have been heroic in saving Greece and salvaging the Euro. The Fund continues to support countries such as ours with advisory services and technical assistance. Some of us used to look forward to their annual Article IV visitations which often reminded one of high-octane seminars at All Souls College. Long may we flourish together!
Obadiah Mailafia
