Another lethal prescription by the IMF

THE global financial institution – the International Monetary Fund (IMF) – is at it again.  It has come up with a new suggestion to the government of Nigeria on how it should manage the country’s economy and, as usual, it is another lethal prescription.  Advancing arguments that have become trite and untenable, IMF Managing Director Christine Lagarde counselled Nigeria to remove subsidy on petrol.  The recent meetings of the IMF and the World Bank Group in Washington provided the forum for the IMF boss to offer the unsolicited advice.  The kernel of her argument was that the discontinuation of subsidy would free funds for investment in health, education and infrastructure.  Early in the life of the MuhammaduBuhari administration, the same IMF boss said Nigeria should devalue its currency.  Not long after and in spite of initial resistance, the value of the naira was reduced by more than 80 per cent.

Abiola Makinde, Rhoda Makinde, others Bag Doctorate Degrees

The ruinous effects of the IMF conditionalities of the 1980s on the economies of third world countries which saw wisdom in the implementation of the harmful recommendations should serve as sufficient reason to be circumspect about any ‘expert advice’emanating from the financial institution.  Why has Lagarde not asked the United States to stop subsidy on agriculture?  Why has she not asked some western nations to have a rethink on subsidy being provided on social services for the well-being of their citizens.How informed is she about the history of fuel subsidy In Nigeria?  Is she aware that subsidy on diesel oil and kerosene has for long been removed while subsidy remains only on petrol? From 1978 to date, the price of petrol has risen from nine kobo to N145.00 – a difference of N144.91 which represents a 1,610.11 percentage increase.  If this cumulative and humongous increase over a period of 40 years has not been used to build schools, hospitals and roads, whatwill a difference of 31 per cent make if N40 is added to the present pump price of the product?

The IMF should get itself sufficiently acquainted with the experiences of third world countries before proffering its unsolicited solutions to their social and economic problems.  Times without number, Nigerians have been told that savings made from withdrawn subsidy would be used to turn the economy around.  If the promises had been kept, Nigeria would have become a paradise on earth.  It should not be a hidden fact from the experts of the IMF that subsidy on petrol is not Nigeria’s problem but the management of the bounty that oil represents.  It cannot be unknown to the IMF that wilful mismanagement and not subsidy on petrol created the situation in which obscene opulence exists side by side with pathetic poverty.  If the withdrawal of subsidy on diesel oil and kerosene has not brought about the desired improvements in social services and infrastructure, where then lies the substance in the argument of the IMF.

In spite of recent improvements, power supply still remains a big problem in Nigeria.  A substantial percentage of companies in Nigeria either closed down or relocated to other countries following the withdrawal of subsidy on diesel oil because they relied on the product to power their plants.  So many small-scale enterprises that are struggling to stay afloat,in the country’s fragile economy, will be forced to close shop if there is any significant increase in the price of petrol.  Any price hike will inevitably have a snowball effect on the cost of transportation and general price level. The argument that savings from withdrawn subsidy will work wonders in the provision of basic needs is belied by past experience.

Nigeria is widely known as a country that is too rich to be poor.  Its economic predicaments have not been brought about by the generosityof governments that have been overindulging the citizenry.  The pre-eminence of the country in the comity of the poor is a direct consequence of failure to use the resources of the country for the benefit of its people.  Another increase in the price of fuel will further aggravate the agony of the masses whose interests the IMF pretends to be serving.  If the subsidy on petrol is the only tangible benefit the common people can get from oil-rich Nigeria, let it be.  Whenever the price of crude oil drops sharply in the world market, the country usually faces a budget crunch with many states having difficulties paying their workers’ salaries.  When the price goes up, there is, most of the time, an increase in fuel price occasioned by higher landing cost of imported finished products.  Head or tail, the common people are losers.

In other member nations of the Organisation of Petroleum Exporting Countries (OPEC), the landing cost of imported petroleum products is not an issue.  It should also not be in Nigeria.  The numerous charges that are added to the price of imported fuel to make up the landing cost should not have been part of Nigeria’s financial burden if the country’s oil has been responsibly managed.  The cost of transporting crude oil to wherever it is  refined, the cost of transporting refined products to Nigeria, import duties, excise duties, demurrage, port charges, the cost of distribution to and  by the jetties, the cost of corruption and other sundry expenses are all additions to the pump price of fuel that should have been avoided.   Nigerians are being saddled with this burden simply because the country lacks the refining capacity to meet its domestic requirements. What has put Nigeria in this dire strait is nothing but fuel importation. The focus of IMF experts, if they really mean well for Nigeria, should be on how to reduce the pervasive poverty in the land and not on how to make the poor poorer.  The organisation is offering another lethal prescription for a single-product economy on the edge of a precipice.

• Olatoye is a veteran journalist