ASSESSMENT OF IMF LOAN POLICY ON ECONOMY DEVELOPMENT OF NIGERIA. CIVILIAN RULE 1999-2015
1.1. BACKGROUND TO THE STUDY
Development is a universal attribute of man and matter, of society and nature, but the direction and speed of the process in man and society can effectively be controlled, and in nature, considerably influenced, by him. However, development involves areas of economic, political, socio-cultural, technological and individual. Sustainable economic growth is a major concern for any sovereign nation most especially the developing countries which are characterized by low capital formation due to low levels of domestic savings and investment (Adepoju, Salau and Obayelu, 2007). It is expected that these DC when facing a scarcity of capital would resort to borrowing from external sources so as to supplement domestic savings, thus, the constant need for governments to borrow in order to finance budget deficit has led to the emergence of IMF loan. IMF Loan Policy as a technique of economic management to bring about Sustainable economic growth and development has been the pursuit of nations and formal articulation of how money affects economic aggregates dates back the time of Adams Smith and later championed by the government. Since the expositions of the role of IMF Loan Policy in influencing macroeconomic objectives like economic growth, price stability, equilibrium in balance of payments and host of other objectives, monetary authorities are saddled the responsibility of using this policy to grow their economies. In Nigeria, IMF Loan Policy has been used since the Central bank of Nigeria was saddled the responsibility of formulating and implementing IMF Loan Policy by Central bank Act of 1958.
The International Monetary Fund (IMF) was conceived and nurtured at Bretton Woods Conference (USA) in 1944 by representatives of forty-four (44) countries. These countries include among others, United States of America, Japan, Canada, Britain and few Latin American countries. The conference was called to discuss the international trade and payment problems that were causing monetary upheaval and inducing many countries to adopt protective and restrictive trade practices. The conference was also called to reconstruct and restructure many European economies, which have been ravaged by the Second World War. For Nigeria the prospect of international loans offers a mixed blessing, for the country economic development. With Nigeria seeking international loans to help ease their oil pain, investors are hoping that any loans will lead to a revision of their worrisome economic policies, Moreso, looking at recent reports suggesting low oil prices are here to stay, major producers are pulling out a number of stops in order to outlast a devastating slide that has seen many pushed to the brink.
Reconstruction and restructuring a war-ravaged economy is extremely an expensive task. The countries involved obviously could not foot the bill of such huge expenditure without foreign assistance. The united states of America was ready to protect these European economies from communist temptation thus, quickly devised what came to be known as the Marshal plan, which essentially brought in resources to finance the reconstruction and restructuring programmes of the war ravaged Western European countries. The United States of America also considered it necessary to establish a strong and lasting trading relationship and to strengthen the relation and interest of alt the Western European countries. Therefore, to facilitate and promote such international trade, it was considered very important to set up an international organization with adequate resources and control to facilitate the payment and provide short-term balance of payment facilities for countries suffering from balance of payment deficit caused by temporary and non-structural economic dislocations.
This conception gave birth to international monetary fund as an institution suitable for this purpose. Just recently, the Managing Director of International Monetary Fund, IMF, Christine Lagarde has asked Nigeria and Nigerians to brace up for harder times, following the massive fall in the price of oil globally, just as she said that the country since inception recorded the slowest pace of growth in the year 2015, thereby calling for increase in Value Added Tax(VAT),as a result of the federal government finding it hard to broaden the country’s tax base against the backdrop that Nigeria has the lowest VAT rate in the African continent. When the International Monetary Fund was established in 1944 (World Bank Report 1996), most of the developing countries were under colonial rule and their economies were simply under imperial control with nothing but simple agricultural products and raw materials which were regarded as products of imperial countries.
The International Monetary Fund was therefore essentially set up to address short-term balance of payment deficit of western industrial countries. The articles establishing International Monetary Fund stipulated that as developing countries are becoming independence they could join the International Monetary Fund since they might also experience short-term balance of payment crises for which they could seek and perhaps get assistance. Nigeria became signatory to World Bank Articles of Agreement in 1961, shortly after her independence in 1960. This is exactly 17 years, after the World Bank came to existence. Since then, the World bank assisted projects in Nigeria amounts to not less than 120 projects and over 121 International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA) credit Nigeria’s inability to service her debts and failure to strictly implement the loan conditionalities (i.e. economic reform programme) the World Bank disengaged from Nigeria.
The recent re-engagement with Nigeria since 1999 was not merely as a result of the de-militarization and democratization of the Nigerian polity, but also as a result of the willingness and determination on the part of Obasanjo’s Administration to pursue and fully implement a world Bank Sanctioned and approved economic reform as encapsulated in the National Economic Empowerment and Development Strategies (NEEDS) document. as of July, 2006, the World Bank assistance to Nigeria involves 20 active (on-going projects with the commitment value of about US $1.9 billion. These 20 active projects cover all the major sectors of the Nigerian economy including privatization programme; community – based projects; health – care system; educational sector (i.e UBEP); urban development projects and power sector reform. For example, World Bank Supported the privatization programme with the sum of US $100 million, urban development programme (i.e. Lagos metropolitan projects) with US $ 200 million. As of January, 2010, over 1600 communities in the first phased states of the community-based development project have successfully completed 1,017 sub-projects that include 348 school projects, 350 water projects, 90 road projects, 90 health projects, 72 electricity projects and 67 other projects such as environmental protection, training centres and commercial markets.