IRIN Focus on new arrangements with the IMF, World Bank

A US $1-billion standby credit approved at the weekend by the International Monetary Fund (IMF) and current discussions with the World Bank on a US $3-billion concessionary loan attest to a turnaround in Nigeria’s relations with the two institutions, which had been strained since the early 1990s. The current rapprochement is being touted as one of the first dividends of democracy reaped by the government of President Olusegun Obasanjo since his election last year ended more than a decade and half of military rule that devastated Nigeria’s economy and bequeathed an unprecedented social crisis on its more than 110 million people. Justifying the IMF’s decision to approve the standby facility, Managing Director Horst Kohler commended Obasanjo’s economic reforms which, he said, have restored macroeconomic balance to a level that has brought back confidence to the economy of Africa’s biggest oil producer. “The Nigerian authorities are to be commended for the progress made toward restoring macro-economic stability during their first year in office,” Kohler said at the end of a meeting with Nigerian representatives on Friday. Such confidence had been lacking since 1993 when then military ruler General Ibrahim Babangida was accused of deviating from a controversial structural adjustment programme begun in 1987. The ensuing chill in Nigeria’s relations with the two bodies continued after Babangida annulled elections in 1993 that were widely seen as free and fair. Instead the country sank deeper into the tight grip of military dictatorship as Babangida’s former deputy, General Sani Abacha, seized power in the turmoil following the annulment and grounded the country with his brutal ruthlessness. Abacha’s death in 1998, and Obasanjo’s emergence from prison - where he was consigned for allegedly plotting the dictator’s fall - to win last year’s presidential elections, marked a new beginning for Nigeria. Relations with Western powers, frozen in the Abacha years, thawed rapidly, rubbing off on the Bretton Woods institutions, whose top officials soon began trips to Nigeria to pick up things where they had been left off. Despite being a major oil producer, the country was weighed down by an external debt of over US $30 billion, generated by the profligacy of past administrations and owed mostly to the Paris Club of Western creditors. Total annual revenue was under $15 billion and with oil prices just emerging from record lows, Obasanjo had little room for manoeuvre to move the country away from economic stagnation and back onto the path of growth. “A key strategy of Obasanjo’s government was therefore to try and secure some relief from the heavy debt burden in order to free enough resources to propel economic recovery,” economist Tunde Bamigbetan told IRIN. “But Western powers, acting through the IMF and the World Bank, pinned any assistance on far-reaching market reforms, including privatisation of government enterprises, removal of subsidies and freeing up the foreign exchange market.” As a military ruler in the 1970s, Obasanjo had overseen the establishment of many of the government-owned companies now marked for sale. However, since his second coming to power, he has declared himself a convert to free market reforms, including privatisation. He has also moved to implement most of the reforms demanded by the international financial institutions and the creditor nations in order to earn the latest deals with the IMF and World Bank. But he has also set off strong feelings of apprehension in very vocal segments of the population, particularly labour and the university community. For most Nigerians, memories of past economic programmes associated with the IMF and the World Bank are of massive devaluation of the national currency, hyperinflation and a steep descent into poverty, which saw key development indicators dropping below levels achieved at independence in 1960. Therefore, the type of economic programme often required by both bodies are deeply resented by Nigerians. When Obasanjo raised fuel prices by 10 percent in June as part of the deregulation process, riots broke out in various parts of the country and a nationwide general strike called by the umbrella Nigerian Labour Congress forced the government to beat a retreat. Academics and students have also primed themselves to confront the government over suspicions that a new policy to grant universities full autonomy is part of a programme agreed with the World Bank to privatise education and rationalise courses. Nigerian universities were badly hit by a brain drain that took a heavy toll on scholarship as the real value of salaries fell by more than 1,000 percent in less than a decade of SAP. “Whatever good the new relations with the IMF and World Bank will do, if they entail more painful economic reforms for the populace, then certainly Obasanjo has his most difficult political battles ahead of him,” Sanya Ade, a university lecturer, told IRIN. “Nigerians will need a lot of convincing after their past experiences.”