The world’s economy was in shamble after World War 1 (1914-1918) and the political landscape of the world was altered. The impacts of the war culminated in the Great Depression of the 1930s, but neither the United States nor Great Britain had the resources to single-handedly prevent the worldwide depression. The search for ways to rebuild the world’s war-torn economy prompted the Bretton Woods Conference in New Hampshire in July 1944 that produced the multilateral organizations (IMF, the IBRD -later the World Bank- and the International Trade Organization), which were collectively named after the city of Bretton Woods. The ITO issue was not completely settled at the conference and thus the GATT was set up to control international trade. However, the ratification of the GATT agreement led to the formation of the World Trade Organization (WTO) in 1995 to formally regulate international trade.
Historically, the IMF provides short-term financial assistance, while the World Bank gives out long-term development loans to needy countries. Unfortunately, Nigeria is among the nations that have depended on the IMF and the World Bank for development cash. The harsh economic policies foist on nations by these organizations as conditions for loan, have derailed and destroyed their economic destiny. For instance, the IMF austerity measure imposed on Nigeria in the1980s led to rising inflation and unemployment, which cut the workers’ purchasing power in half. And class conflicts boiled prompting massive ‘capital flight’ and ‘brain drain.’ The Nigeria economy has since been in shambles. Nigeria is not alone; according to Chossudovsky (April 9, 2000) the IMF-World Bank used its ‘economic medicine’ to ‘undermine the economy of the former Soviet block and dismantle its system of State enterprises.’ And the harsh policies imposed on Eastern Europe, Yugoslavia and the former Soviet Union since the late 1980s have ‘devastating economic and social consequences.’
However, when Chief Olusegun Obasanjo took office in 1999, many thought of him as the savior, but he is today one of the controversial leaders in Nigerian history. The unending fuel price increases-a policy prescription of the Bretton Woods institutions, which is also the hallmark of this administration, has caused more crises in the society than during the years of military misrule. This has particularly overburdened the poor, as the middle class has virtually withered. Nigerians are working harder and paying more to feed their families and for transportation. Despite the administration’s claims that its reform programs are making economic miracles, the Nigerian economy remains comatose. The hardship currently in Nigeria gets one so depressing you want to scream!
Ineffective and inefficient utilization of the abundant resources and the inefficient social institutions are seriously hampering growth. And the prospects for economic recovery are bleak because the nation still depends on the policy prescriptions of the IMF. As Girling (1985) points out ‘when a country is dependent, it is likely at least to listen politely, if not attentively.’ Nigeria has not only been listening it has compromise its sovereignty. Recent newspaper reports indicate that the IMF has an office in the Finance Ministry at Abuja apparently to direct its affairs; also it is remotely controlling the operation of the Central Bank. Despite the Fund’s “economic medicines” the citizens are still poverty-stricken because the economy is barely limping.
It seems that the nation is yet to learn from its history or it has failed to implement what it has learned. The leaders of Nigeria should know that the welfare of the citizens should come first in its economic reform programs and should not try to satisfy the insatiable Bretton Woods institutions at the detriment of the people’s welfare. The removal of subsidies, the unending hikes in the price of petroleum products, and the controversy over its appropriate pricing, which often provoke riots in the society, has negatively impacted the already weak economy and eroded the people’s living standards. Thus, personal liberties are being threatened. With fake ‘democracy’ in place those benefiting from the ‘fraud’ and ‘economic genocide’ are looking the other way while Mr. President is politically repressing the masses with its draconian policies. As Friedman (1982) has noted “the fundamental threat to freedom is power to coerce, be it in the hands of a monarch, a dictator, an oligarchy, or a momentary majority.”
Is there any wonder why has Nigeria failed to progress? Nigeria has failed to develop economically because it lacks the preconditions for meaningful economic growth and development. For the nation to progress it must first tame corrupt practices and change the mindset of the population. The 2004 Corruption Perceptions Index released recently by Transparency International (TI) rank Nigeria as the third most corrupt country in the world, against its second position in 2003. As Dr. Peter Eigen rightly noted corruption is "a daunting obstacle to sustainable development" because it affects education, healthcare and poverty alleviation. In addition, the society should fix its roads, provide reliable electricity and good water supply, and improve its communication systems, and basic health services. And the failure to provide good operating environment, such as political stability and rule of law, are among the obstacles for sustainable economic growth and development. Evidence shows that political instability has caused serious disruption in the economy. It has been pointed out that a mere democratic form of government is not a prerequisite for economic growth, but a lack of it could limit the prospects for growth, if it results in political instability. That is the crux of the matter in Nigeria!
Part of the reasons why Nigeria has failed to develop could be linked to the poor state of its educational institutions. Critics have noted that investment in human capital is a critical area Nigeria has neglected for too long. Therefore, it was not surprising when the United Nations Human Development Index of 2004 indicates that Nigeria is among the ‘Least Livable’ nations. The Index concentrates on life expectancy, educational attainment, and adjusted real income of the citizens. Obviously, no nation would make any meaningful socioeconomic stride without viable educational institutions. For that, the nation must invest copiously in education with particular attention given to vocational and technical education. Although vocational and technical education seem deficient in ‘citizenship or leadership’ training, they could provide students the skills to become productive entrepreneurs and engender creative and innovative ideas that would enlarge the nations economic pie, and increase personal freedom.
The major areas of governmental policy that are relevant to economic stability are monetary policy and fiscal or budgetary policy. It is thus believed that political and economic reforms (control over money in particular) can be a ‘potent tool for controlling and shaping the economy.’ But as Milton Friedman notes in Capitalism and Freedom, its potency is dramatized in Lenin’s famous dictum ‘that the most effective way to destroy a society is to destroy its money.’ There are some good reasons not to overvalue the local currency (it weakens the export sector as it makes a country’s goods expensive in the international market). But constantly bruising the Naira would not do the economy any good, because outside petroleum, which the nation does not have sole control over its price, Nigeria has little or no product to export. And trade liberalization has not helped the situation either! With its weak industrial base most of the nation’s domestic industry use imported material inputs, thereby increasing the cost of doing business in Nigeria. It also affects the nation’s balance of payment position because imports are substantially higher than exports. Evidence on the ground shows that trade liberalization has only succeeded in making Nigeria a dumping ground for cheap foreign goods and robbing the weak local industries of their protections.
Nigeria lacks of economic freedom (partly defined as minimal government intervention in the economy). This could hinder economic growth or derail its democratic experiment because any individual deprived of the basic wherewithal could not participate effectively in a democratic political process. Improved economic freedom could lead to greater economic growth because the freer the economy, the better off the people. Therefore, Amartya Sen observes in Development As Freedom that “Expanding the freedoms that we have reason to value not only makes our lives richer and more unfettered, but also allows us to be fuller social persons, exercising our own volition and interacting with-and influencing-the world in which we live.”
Therefore, the solutions to Nigeria’s socioeconomic and political problems lie in the hands of the leaders and the people. To reduce the costs material inputs and basic necessities the government must sincerely deregulate the downstream petroleum industry. (The downstream sector is involved with the production, supply, transportation, storage, marketing, distribution, and retaining.) The high cost of petroleum products has negative distributive consequences on the economy because oil is used in the manufacturing and distributions of other goods and services. Presently the federal government has almost full ownership and management of this sector. And this has curtailed competition; deregulation without real competition would not bring down the prices of commodities. Innovation in technology should get priority attention; and new and more efficient refineries should be constructed, and the four existing refineries privatized. Nigeria may not progress beyond its current level if it does not change the way it conducts its affairs. More importantly, Nigeria must learn to ignore any policy dictates of the Fund that would perpetuate poverty and frustrate the possibility of sustainable economic growth and development in the nation.
It is proper to note in conclusion that the policy prescriptions of the Bretton Woods institutions would not make up for the lack of transparent in governance, tame corruption, bad leadership, improve the educational system, and or its skewed value system and dilapidated social institutions. In addition, the policies would not resolve the inappropriate fiscal and monetary policies and Nigeria’s long history of relative political instability, which are the stumbling block to sustainable economic growth and development. In fact, these are the more compelling reasons as to why Nigeria has failed to develop!
Victor E. Dike, CEO of the Center for Social Justice and Human Development (CSJHD), in Sacramento, California, is the author of Nigeria and the Politics of Unreason: A Study of the Obasanjo Regime [London: Adonis and Abbey Publishers, November 20, 2003]