Revitalizing the Nigerian economy: Beyond western dependence (ii)

Kola Olaniyi

Olaniyi is a graduate of Electronic and Electrical Engineering, Obafemi Awolowo University, Ile Ife,  kellokelington@yahoo.com, 08068495313

2. ILLUSION OF A BAIL OUT DEPICTING HEGEMONY

Whenever it is being aired or proposed that bail-out, aid or loan is to be received by the third world countries, it should ordinarily be greeted with loud ovation. Unfortunately, this is the time for more economic servitude on the path of the recipient while a form of economic hegemony on the side of the guarantor. In the process of illusioning hegemony to mean bail-out, Bretton woods institutions-the World Bank and the international monetary fund (IMF)-play the scripts of the West. For the past two decades and still counting, the World Bank and the IMF have forced developing countries in creating conditions that are of immense benefits to Western cooperation and government under a scheme known as the Structural Adjustment Programme (SAPS).

For third world countries/government aspiring for development, the Bretton wood institutions act as a barricade for stalling that aspired development. An example of this is evident in 1972 to the elected government of Salvador Allnde in Chile whereby the then president Richard Nixon of the United State in tandem with his security adviser Henry Kissinger used the bank to make the Chilean economy scream which eventually paved the way for the bloody cup of 1973.

The bail-out itself would have been helpful to the third world countries provided there are no stringent conditions attached. For policies such as relaxation of trade restrictions, privatization and removal of subsidies by government of the third world further impoverishes the masses and open up the economy of the West for trade liberation and market. Unfortunately these stringent conditions in most cases are sine qua non for securing loans or relief. It therefore posits indirectly that the proposed bail-out is only a smoke screen for actual dominance and dependence of the third world countries on the West.

For a country like Nigeria in the 1960s and early 70s was not indebted neither was it dependent on the west for bail-out. In fact she prosecuted a 3 year civil war without borrowing/external aid. Then, agriculture was the mainstay of her economy, being agrarian. Much hope was poured on her during independence because of the recent discovery of oil which was a precious gold then. To the consternation of the world at large, the country mainly due to oil glut (that is the comparative advantage she had in oil had waned/and the increasingly diminishing participation in agriculture for active or over-reliance in oil exploration in the 80s instigating a pro rata fall in the price of oil at the international market) made her have balance of payment deficit in the 80s.She, then had already made revenue from oil the primary source for budgetary planning.

Having established an over-bloated size of government and embarked on white elephants, she couldn’t run her day to day activities in a balanced manner. Then, oil revenues had fallen 42 per cent in two years as the price of crude collapsed from $40.97 a barrel in December 1980 to $28.25 in March 1982. The look/search for foreign loan became ineluctable.

Muhammad Buhari after seizing and ousting the Shagari Administration on the premise of greed, corruption and ailing economy began an advanced negotiation on a proposed IMF bail-out for the comatose economy.Negotiations between the IMF and Buhari government were dead locked because of disagreement on the conditions the lending institution attached to the loan facility. The then regime’s finance minister Dr. Onaolapo Soleye x-rayed the conditionality’s of:

• Curtailment and review of public expenditures
• Reduction of government subsidies
• Classification of parastatals into economic and social categories
• Stoppage of non-statutory   transfers such as loans to state government
• Simplification and rationalization of traffic structure
• Review of interest rate
• Relaxation of import restriction
• Devaluation of the naira
• Vigorous export promotion

and then concluded that securing the loan connotes a poisoned chalice to the economy.

General Buhari resolutely insisted that at least three of the conditions (removal of petrol subsidies, naira devaluation and relaxation of trade restrictions) were unacceptable. With the IMF obstinate on her conditionality’s, Buhari quite stated that the loan was politically suicidal saying “we have realized the damage IMF loans have done to developing countries. None of the developing countries that have taken IMF loans have come out of it well. So if we are to go by historical indications to take IMF loans on the terms they want us to, will be tantamount to virtually destroying our own country. Devaluation does not make sense to Nigeria’s at all.

The regime of Ibrahim Babangida was like a loosening of the asphyxiating stranglehold experienced by politicians during the Buhari regime. Not only did he pardon the jailed politicians, he started the negotiation on the proposed IMF loan throwing the matter into a court of public opinion. Being an innocuous impostor and deeply Machiavellian, Babanjida threw cautions to the wind by accepting the conditionality’s for securing loan. It removed government involvement in fixing the value of natural currency and initiated the structural adjustment policies. This caused untold hardship for the citizenry. Unemployment astronomically rose. Local industries were closed up because of the relaxation on import restrictions making foreign goods cheaper and locally made goods unable to compete.

Despite securing the loan, persistent current account and budget deficits, a huge backlog

Of Uncompleted projects-especially in the public sector-,factory closures, large scale  Galloping Inflation with a negative trend in economic growth as represented by a contraction in the Gross Domestic Product (GDP) marred his tenure. External loans from the ICM, which became significant in the early 1980’s, carried high and floating interest rate usually tied to the LIBOR which itself escalated from barely 3-4 per cent in the late 1970s to 13.0 per cent in 1989. Moreover, the restructuring that was undertaken particularly for the Paris Club debts did not give sufficient breathing space and therefore, made the servicing of the debt difficult. An arrears of principal and interest was recapitalized to further compound the debt situation. Indeed, the rescheduling made debt service as well as the stock of debt to increase. For instance, the original value of Nigeria’s external debt which was $18.9 billion in 1985, increased to $35.9 billion as at 31st December, 2004 in spite of cumulative debt service payments of about $36.6 billion during the same period.(Ogunlana,2004) Nigeria was granted debt relief during the obasanjo civilian regime: that helped broke the ice on servicing of debt and hitherto pleas for debt cancellation. It is still rather disturbing that after the then debt relief the country has still been borrowing without any lasting show.          (Michael peel, 2009) gave a sterling account of the path IFIs(International Finance Institutions) played in impoverishing the Nigerian economy by giving stolen proceeds a safe haven in their respective countries. His encounter with the Enrico monfrini, the lawyer charged with recovering the stolen assets for the Nigerian government placed enormous guilt on the west financial institutions as accomplices in corruption.

According to Monfrini, the modus operandi for the asset recovery was to place a bait for stronger evidences of aiding and abetting of illegal fund to the western authorities which was swallowed by the Swiss authorities which then having gone through the Nazi gold scandal issued alerts to hundreds of banks confirming the authenticity of the accounts provided by Monfrini. What is more shocking is the manner stolen funds moved from one country to the other. He said the suspected money laundering appeared to involve at least half a dozen countries on three continents leading to changing in the currency it was held before. With much resilience and commitment on the path of Monfrini,giant stride was achieved which includes repatriation of $500m from Switzerland in 2004 and $160m from Jersey in 2003. All recovered loot stood to the credit of 12bn by early 2009.Here is a pointer to the basic banking practice the western financial system disregarded by providing sustained dictatorship around the world. Most notably in the 1999, the US Senate permanent subcommittee on investigation issued a stinging report on Citibank’s conduct in the Abacha affair with the document x-raying the sinister interest of the financial institution overriding legality/otherwise of its client money. The role of international banks in facilitating these kinds of transactions has become something of a célèbre (Michael Peel, 2009).

Let us not forget the not-too-far case of DSP Alamieyesieyha the former governor of Bayelsa State arrested in London for money laundering in 2005. While I strongly agree that the Nigerian political office holder is found corrupt and dishonest, I only point again the aim of Western government or their over bloated financial institutions in aiding and abetting corruption. The New York Times reported after studying official state documents that the state poverty eradication committee received a little more than half of what was spent on toiletries for state officials between 2002 and 2005; the state had spent more than $25m on his official mansion. Over his six and a half years in office he allegedly racked up assets abroad of more than $20m and about $11.5m of that sunk in four properties in London. As at the time of this financial madness, Joseph, a London based attorney, put an allegation in which the former governor paid E6 100,000 of Bayelsa money in equal tranches into five bank accounts in the name of each of his children. He neither responded to the claim. Having been aware of this stack illegality and subversion of best practices, the banks and estate agents involved were undeterred in their dealing with the governor showing lack of probity on the path of financial institutions. These financial institutions rather zeroed in on their gains as trustees of the trustor not minding the manner the trustor acquired the trust.

Although foreign dependence on loans might have diminished with the issuance of government bonds in funding deficit, the country continually depend on the west for foreign direct Investment and privatization of her enterprises. As earlier stated all these would not come to be if Nigerian is yet to agree to the deal of economic servitude or dependence.All the afore said is to point the mind of the audience to the fact that bail-out, loans or whatever it is from the west is a diplomatese for hegemony, dominance and self-assertion in the area of economy and trade.

I conclude here with the words of George Washington, the former US president who said “it is madness for one nation to expect disinterested help from another. The US does not have friends but interest” (Abbah, 1996).Hence help bail-out or loans from the West means dominance, buoyancy, hegemony or prosperity for the west and misery, servitude or subservience for the loaned.