The involvement of IMF in the Economic development of Nigeria

The involvement of IMF in the sparing development of NigeriaHas the sparing integration and employment liberalisation of Nigeria by IMF enhanced its economic development? question stretch forth This question has contested several evoking and vigorous answers- succeeding(a) the am tolerantuities and contradictions of the IMF concepts that scram riddled its purpose, and has therefore, created an enormous un definitety and complexity which evidently is raising new anxieties and threats to human surety and development especially in underdevelop economies.Method My main source of information provide be from secondary data such as Google books, articles, books and journals. I leave behind apply a qualitative method approach.Purpose The objective of this term paper is to analyse some economic indictors such as gross domestic product, pomposity and other economic variables from these secondary data to leave if the integration and trade liberalisation of Nigeria by IMF has enhanc e the economic development of Nigeria or rather belie its development.Keywords Globalisation, economic tuition, IMF, Nigeria, GDP, Economic branch, Inflation, dependent theory, Liberal Theory,AbbreviationsGDP glaring Domestic ProductSAP Structural Adjustment ProgrammeOECD Organisation for Economic Co-operation and DevelopmentGATT General Agreement on Tariffs and callingWTO gentleman Trade OrganisationIMF International M iodinetary FundCBN Central Bank of NigeriaNEEDS National Economic Empowerment and Development StrategyMNCs Multi National CompaniesLDCs Least Developed CountriesPRSP P everywherety Reduction Strategy ProgrammeFDI Foreign Direct InvestmentOAU Organisation of African UnionMAN Manufacturing Association of NigeriaNEITI Nigerian Extractive Industries Transpargonncy InitiativeNACCIMA Nigeria Association of Chambers of Commerce. Industry, Mines and AgricultureNIEC National Economic Intelligence CommitteeNASSI Nigeria Association of microscopical Scale Industrial1. I NTRODUCTIONThe economic of Nigeria and as other British colonies has been under gigantic influence dating back to 1846 when the protective barriers or duties on agricultural imports were abolished. By 1860, all trace of restriction on trade and tariff restrictions were removed and an era of relax trade imperialism treaties begun .The imposition of the Free Trade by the British on its colonies and informal empire to obligatory maintain low tariffs by treaties with the chief rate of reducing their sovereignty in moneymaking(prenominal) weigh and giving extraterritorial right to foreigners (Angus Maddison, existence Economy, April 2001).The two populace wars shattered this liberal array and caused the collapse of capital flows and the beggar-your-neighbour trade system. However, by 1950 to 1973 a significant lush festering in the world economy was put down and that era was referred to as the golden age. This growth was due to several reasons that principally because of the creation of a liberal international order by advanced capitalist countries with explicit and rational codes of behaviour and institutions for co-operation (OEEC, OECD, IMF, World Bank and the GATT) in order to avoid the incur of the beggar-your-neighbour behaviour of the pre war years(Angus Maddison). However, Nigeria and the rest of the 168 countries of the world were considered falter in their economic development because of the alarming deadening in economic march of these countries after the golden age. This liberal international order is known as globalization today.The issue of the faltering economies of this heterogeneous group of 168 countries has brought questions, opinions and views of pros and cons of globalisation. Some believe that globalisation has made the world wellnessier while other believes the contrary. Theodore Leavitt(1983) to explain globalisation market state that We live in a rapid globalising world and certain national identifiers interchangeable tast e, technology, market and finance are no longer constrained by national boundaries. They operate on a global basis. The shaping features of globalisation are interdependence and connectedness of the economics, politics and culture of nations and non uniformity of markets and taste of a single country (Yong M, 1989).The frequently these economies integrate, on the one hand the more new ideas nigh politics, education, entertainment and services and expansion of topical anaesthetic culture perimeters are reinforced and diffused. On the other hand, the international earnings becomes increasingly complex and unpredictable. Beside, as is known fact that, virtually all humans are opportunistic hardly would nations work together and not lack to outwit one another either to gain an economic, brotherly or military advantage.While considering the complexity of economic growth through integration. The question leave be, is it assertable for developing economies to transform into vibra nt economies for growth and development amidst this complexity? Well, base on the complexity and competitiveness of the developed economies over those of the underdeveloped economies and the implicit in(predicate) backing of these developed economies by international global institutions such as the OECD, WTO, GATT, IMF, and World Bank, a sustainable economic growth of these underdeveloped economies is slim. This has aroused great criticisms and close examination of the impact of globalisation on the development process of these underdeveloped economies because of the continual retardation of these economies. This persistent situation has resulted to the debt crisis of many of these economies and had led to curve poverty, squalor, deprivation, frustration and worst political inst aptitude.1.1 GlobalisationThe term globalisation is frequently used but seldom defined because of the vast interpretation of its phenomenon and perhaps its four-fold manifestations of its prevailing trend . It has become a buzzword of the century practically use to describe everything that is happening in the world today. Since its advent, a once impression big world is made into a much smaller place where the interaction between assorted countries and economies of the world are increasingly integrated by calculates same internet, TV, radio and mobile phones and the creation of institution like World Trade Organisation (WTO), World Bank and International Financial Institutions (IFIs) has expanded international trade and also portfolio of investment such as foreign loans, international policiesBrittan (19982) viewed globalisation as a whirlwind of relentless and disruptive change which leaves establishments helpless and leaves a civilise of economic, social, cultural and environmental problem in its wakes.My own interpretation of globalisation is thatGlobalisation is the marginalisation of the underdeveloped economies by the developed economies for their self sustainability pu rposes.1.2 Research distrustHas the economic integration and trade liberalisation of Nigeria by IMF enhanced its economic development?1.3 Research IssueThis question has contested several evoking and vigorous answers- following the ambiguities and contradictions of the IMF concepts that permit riddled its purpose, and has therefore, created an enormous uncertainty and complexity which evidently is raising new anxieties and threats to human security and development especially in underdeveloped economies.1.4 Research ObjectiveThe objective of this term paper is to analyse some economic indictors such as GDP, inflation and other economic variables from these secondary data to see if the integration and trade liberalisation of Nigeria by IMF has enhance the economic development of Nigeria or rather distorted its development.1.5 Paper DesignThere are about six varied investigate designs (Philosophical, Literature review, and Case study, Survey, Evaluation and Experiment) but I allow for be choosing two among these six research designs.Philosophical its often used to examine a research issue from another perspective because it is based on existing literature.Literature review this design aim at summering data already collected for a particular topic. When data are qualitative, the analysis of this data can create new knowledge and perspectives on the matter previously put forward.2. PROBLEM STATEMENTNigeria, a country located at the trigger point of Africa and the envy of all African states was forecasted by economists to croak ahead of most of the African states in her economic development to become the giant of Africa and the international economic trade centre such as Dubai, key Asia and China of today. These believe and forecasts were not just based on mere passive ideas but on concrete facts of the availability of natural resources, human resources and commodious market base in Nigeria.With the boost in agriculture and earning top dollar from the export ation of black gold, Nigeria discovered oil the money spinner, at Oloibiri in hand over Bayelsa state in 1956. Nigeria got her independence in 1960 and was seen as nature goes perfect blessed with good climate and vast fertile agricultural farming almost twice the size of England with high human resource index and huge market base. With the abundant untapped natural resources, it was logical for anyone and not altogether economist to have thought that the involvement of economics experts such as the IMF and the World Bank in the running of Nigeria economy will accelerate its inflection to attained socio-economic stability universe that these institutions main goals and objectives are to provide avenues for proper allocation of resources, monitoring of balance of payment, evaluating and rendering technical assistance through economic Structural Adjustment Program (SAP).However, as the saying goes with great wealth comes greater problems. Today, the oil-rich Nigerian economy su ffers from long hobbled political instability, corruption, inadequate infrastructure, and pitiable macroeconomic management. There is an acute growth in income poverty and worse of all, human poverty- this implies, the denial of choices and opportunities to live a tolerable life (United Nations, 1997) and the fundamental freedom of action and choice to influence key decision affecting their lives.Apart from oil, the strength of Nigeria economy lies in its rich agricultural resource base. From the 1980s agricultural productivity was recorded to be on everlasting declination due to abandonment for oil and that gave raise to rampant rural poverty. This has rendered the economy vulnerable to international shocks which emanates from the fluctuations in world oil prices and the rising of imports prices, therefore creating an external and internal imbalances.These imbalances manifested difficulty in balance of payment, unemployment and low utilisation capacity in all sectors, and deter ioration in purchasing power. Between 1982 and 1994, the debt stock of Nigeria rose at an average rate of 17% which means, stock of external debt increased by a factor of 33 in 22 years aside from domestic debt (Iyoha, 1997). Today, Nigerias public debt is more than 75% of its GDP with the effective debt to export ratio being more than 200%. This ironically has shoot up Nigeria to be Africas biggest debtor with about $ 28.5billion to its external creditor and debt service payments of $3.3billion in 2002 alone and that is expected to be on constant rise (Debt Management Office, 2002).The growth rate of Nigeria external and domestic debt was 9.4% in 2002 against the GDP growth rate of 3.3% and the external growth rate of -6.7% with the average GDP per capita annual growth rate of -0.4%(CBN Annual Report, 2002).Figure proceeds Rate of GDP, Income Per Capital and Total DeptSource CBN Statistical Bulletin 1999 and CBN Annual Reports and Statements of Accounts 2002During the 1960s, Nig eria never spy double- digit inflation. By 1976, the inflation rate stood at 23%. It decreased to 11.8% in 1979 and gun shoot to 41% and 72.8% by 1989 and 1995 respectively which marked the previous(predicate) period of the IMF Structural Adjustment Programm (SAP).Trend of gross domestic product of Nigeria at market pricesTable Inflation, GDP and Exchange RateYearGross Domestic ProductUS Dollar ExchangeInflation Index(2000=100)Per Capita Income(as% of USA)198050,8490.78 Naira1.307.22198598,6192.83 Naira3.201.871990286,3748.94 Naira8.101.4919951,928,64254.36 Naira561.2820004,676,394102.24 Naira1001.11200514,894,454131.01 Naira2071.96For purchasing power parity comparisons, the US Dollar is transfer at 150.00 Nigerian Naira only.(IMF)Based on the impact of inflation, the per capita GDP today remains lower than in 1960 when Nigeria declared independence. By 2005, Nigerias inflation rate was estimated to be 15.6 percent and the GDP was composed of the following sectors agriculture, 26.8 percent industry, 48.8 percent and services, 24.4 percent. (NEEDS)It is to be observed in the first graph the growth in GDP from 1970-1978 was recorded to be 3.1% annually and 1972 to 1973 was the oil boom era there was a remarkable growth in GDP of approximately 6.2% annually. However, in the 1980s to the 90s, Nigeria started to have negative GDP growth rates. This period constitutes the Structural Adjustment Program and economic liberalisation in Nigeria by the IMF and since then the economic has responded to a 4.0% confident(p) GDP growth rate.The aim of this paper is to analyse the impact of the structural Adjustment Programmes introduced by IFIs (IMF) through globalisation on economic development of the underdeveloped economies (Nigeria as case study). This will be by the application of two economic theories (dependency, liberal) and observation of the three economic development variables. The two economics theories will help to give more light on the analysis of the pers istent poverty in the underdeveloped world, Nigeria especially, while the variables to demonstrate economic development. My choice of Nigeria as a case study is due to its idyllic background as a country of immense natural and human resources but 70% of its universe of discourse live below the poverty line (World Bank). I will concentrate on IMF conditionality and its influence on the economic development of Nigeria.3. LITERATURE REVIEW3.1 Economic DevelopmentThere are numerous definitions for economic development as there are people who practice it. Economic development means different things to different people, which today makes the definition of economic development harder than ever in a more concrete and salient terms.Gonalo L Fonsesca at the New shoal for Social Research defines economic development as the analysis of the economic development of nations.The University of Iowas Centre for International Finance and Development states thatEconomic development or development is a term that economists, politicians, and others have used frequently in the 20th century. The concept, however, has been in existence in the West for centuries. Modernization, Westernization, and especially Industrialization are other terms people have used when discussing economic development. Although no one is sure where the concept originated, most people agree that development is intimately bound up with the evolution of capitalist economy and the demise of feudalism.From other perspective, economic development involves the allocation of scarce resources land, labour, capitol and entrepreneurship in ways which has positive effect on the level of business activity, employment, income distribution patterns, and fiscal solvency.3.1.1 The Imperative of Economic developmentProfessor Dudley Seers argues development is about outcomes and development occurs with the reduction and elimination of poverty, inequality and unemployment at heart a growing economy.The 21st century view of development encompasses a countrys consensus to achieve sustainable growth, poverty reduction, gender equality, human development, environmental protection, institutional alteration and human right protection. To put it concisely, development is the ultimate aspiration of modern economies, it is the upward movement of a countrys entire social system. More to the point, development is the remotion of any host of undesirable condition that may perpetrate a state of underdevelopment.Economic growth is a prerequisite for economic development. Facilitating increase in the output of major sectors of production of the economy, such as natural resource and manufacturing either by the improvement of the structural system such as technology, will lead to economic growth. (Todaro, 1994)Kuznets (1971) defined economic growth as a long term rise in capacity to supply increasingly diverse economic goods to its world this growing capacity is based on advancing technology and the institutional a nd ideological adjustments that it demandsThe obstacle facing most of these developing countries is the ability to create a more conducive atmosphere for essential use and harnessing of economic resources. The obstacle has increase anxiety by the increase of economic liberalism that promotes free movement of capital that tends to undermine and marginalise indolent economies.This interdependent global economic dispensation has given rise to disparities among countries of the world on the attainment of economic growth.3.1.2 Growth versus DevelopmentHowever, before I go further, I will like to state that there is a considerable difference between economic growth and development. I may just frankly state that, economic development is a terminology used to refer to the underdeveloped countries and while economic growth refers to the developed countries.Economists Peter Bearse and Roger Vaughan write thatDevelopment is a qualitative change, which entails changes in the structural system o f the economy, including innovations in institutions, behaviours, and technologies which enhance growth,While Growth is a three-figure change in the scale of the economy in terms of investment, output, consumption, and incomeAmartya Sen state thatDevelopment requires the removal of major sources of poverty as well as tyranny, poor economic opportunities as well as systematic social deprivation neglect of public facilities as well as intolerance or over activity of repressive states.Hence, on one hand, economic development can not be achieve without growth because it can be conceived as a multi-Dimensional process or phenomena-increase in per capital income, increase in GNP and improve living standard of the population but, on the other hand, growth is possible without development for the mere fact that it is measured as the increase in GNP, it does not have any other parameter.3.1.3 Historical development of the termTo unfold it will be necessary to show how this term economic de velopment has evolved over time to include a wider variety of variables and not just counsel on economic growth.Economic development is a term conceptualised as a branch of economics in the early 20th century in reverence to growth and industrialisation in the capitalist society by the classical school of economics. However, this school of thought did not put to consideration countries like Africa, Latin the States and Asia but rather an opposite reflection of the developed world that will catch up in time. (History of Economic thought, 2008)Economists after the World War II become more concerned about the low standard of living in so many countries, especially due to decolonisation. The aim of the term changed to include not only the Western world but also the less developed which in fact made most of the population of the globe. Therefore, important reservations were made as opposed to the ultimate objective of the study of economics to include other variable rather than only eco nomic growth.With fast change in the political geography of the world, the need for the formation of supranational bodies (IMF, OECD and World Bank) that would oversee the smooth progress of the developing nations became necessary. The responsibilities of these institutions are to work hand-in-hand with the local government of the underdeveloped nations to sustain and accelerate growth speeding up progress of economic development of these nations.Many believed that economic development started as capitalism but as time went by and changes occurred, the term shifted from capital oriented concept to identify human capital endowments developed by Schultz (1951) as the chief(a) obstacle to the realization of the potential economies of scale inherent in the industrialization of developing countries. Singer (1964) contributed further more to this social development by including health and fertility into the picture. Incorporating elimination of poverty, inequality and unemployment in th e equation by Dudley Seers (1969) gave a notable change in defining the term economic developmentBy 1977 Seers developed a structuralised theory which included social development and economic growth to the overall definition of economic development. As of this point, reservations were made for the third world countries because of the distinctive characteristic that differentiated them from the western countries.Later on, privatisation was introduced such as foreign MNCs as a factor in the economic development of least(prenominal) developed countries (LDCs) by the Neo-Liberals in the 1980s. (History of Economic Thought, 2008)Definition of Economic DevelopmentI decided to put a definition of Economic Development that would beat out fit my analysis of a third world country.Economic development is the fundamental process of increasing the factors of productive capacity- land, labour, capital, and technology -through sustainable growth from a simple, low-income to a modern high-income national, state or local economy. Its scope includes the process and policies of using its resources and powers to reduce the risks and costs which could inhibit investment but improves the economic, political and social well-being of its peoples.3.2 Economic TheoriesThe crisis facing the underdeveloped countries can not be accurately and properly analysed without the examination of some theories underpinning the problem. These crises have triggered scholar and writers with different theories, explanations and research projects aimed at solving and bringing to light the causes and complexities surrounding these crises. (Baran, 1957, Frank, 1971) maintained that dependency theory is the best for understanding the causes of the crises. While others argue that development theory (Rostowe, 1960) or economic explanations (Offiong, 1980) give a more lucid view. Yet, there are others who contended that political explanations (Migdal, 1988) or the liberal theory (Burchil, 1996) is of most i mportant.For the purpose of this paper, I will consider the dependency and liberal economic theories3.2.1 Dependency theoryThe economy of Nigeria is in doldrums from the recent pandemic crisis of capitalism. Though it has always been a beat-up economy which has been suffering from a form of Dutch Disease socio-economic hardship and where the poor masses benefited nothing from the boom in the annals of Nigeria. Nigerians naively thought that for not being fully integrated into the world economy, they could at worst receive a mere scratch from this contagious capitalism crisis. However, this economic swirl was made truly global by globalisation.Andre Gunder Frank, one of the earliest dependency theorists, made it quite clear on this point, historical research demonstrates that contemporary underdevelopment is in large part the historical product of past and continuing economic and other relations between the satellite underdeveloped and the now developed metropolitan countries. Furth ermore, these relations are an essential part of the capitalist system on a world scale as a whole.(Andre Gunder Frank, The Development of Underdevelopment, in pack D. Cockcroft, Andre Gunder Frank, and Dale Johnson, eds., Dependence and Underdevelopment. Garden City, New York Anchor Books, 1972, p).3.This view shows that capitalism promotes greed and blind pursuit of profit. The enforcement of international division of labour is the one proof but the most explicit manifestation of this doctrine is the Comparative Advantage characteristic. This division of labour (dependent and dominant states) is largely responsible for the underdevelopment of large areas of the world. The osmotic act that occurs in this system provides at large an ultimate explanation for the persistence of poverty in these areas of the world. The dependent states are made to supply tinny minerals, agricultural commodities, and cheap labour and these economies also serve as the repositories of surplus capital, o bsolescent technologies and manufactured goods. This flow of goods, money and service into the dependent states are considered functions which orient these economies towards the outside. However, these dependent states have little or no influence to determine the allocation of their resources it is rather determined by the economic interests of the dominant states. This division is considered by the capitalist a necessity for efficient allocation of resources.Dependency theory can be an explanation of economic development of a state in term of the external influences (political, economic, and cultural) on national development policies. (Osvaldo Sunkel, The Journal of Development Studies, Vol. 6, no. 1, October 1969, p. 23)Dependency can be define with emphasis on historical dimension as an historical condition which shapes a certain structure of the world economic such that it favours some countries (Dominant states) on the detriment of others(dependent) and therefore limits the dev elopment possibilities of the subordinate economics. This a situation which the economy of a certain group of countries is put under unfavourable condition by the development and expansion of another economy, to which their own is subjected. (Theotonio res publica Santos, Readings in U.S. Imperialism, 1971, p. 226)However, there are serious disagreements among the various strains of dependency theorists. Although there are some core propositions which seem to underlie the analyses of most dependency theorist, heretofore there are vigorous and challenging debates among the liberal reformers (Prebisch), the Marxists (Andre Gunder Frank), and the world theorists (Waller Stein) on the dependency theory.3.2.1.1 The Core Propositions of Dependency TheoryThere are contestable total of propositions, which form the core of dependency theory. I will take two out of these numerous propositions because the suit my paper1. Underdevelopment is a condition fundamentally different from undevelop ment. The latter term simply refers to a condition in which resources are not being used, while Underdevelopment refers to a situation in which resources are being actively used, but used in a way which benefits dominant states and not the poorer states in which the resources are found.2. The distinction between underdevelopment and undevelopment places the LDCs countries of the world in a profoundly different historical context such as behind or catching up to the developed countries of the world.3.2.2 Liberal Economic Theorycapitalist economy has failed to develop Nigeria, despite it huge natural and human resources. The Nigerians with necessary lesson incur from capitalism needed an alternative for economic -oriented revolution. The neo-liberal saw this as an opportunity to present itself as an economic alternative system for Nigeria and Africa as a whole. Since then, Nigeria has been compelled to swallow one economic prescription after the other such as IMF and World Bank impose d reforms SAP (Structural Adjustment Program), PRSP (Poverty Reduction Strategy Papers) etc. and now NEEDS (National Economic Empowerment and Development Strategy), yet poverty sedate persist. The World Banks seminal report title Sub -Sahara Africa (1999) signified an ideology that retain both emphasis upon domestic sources of economic malaise and the faith in liberal economic policies which has a twin resemblance to belated centrality of state and accountable government to sustained the capitalist development.(Sandbrook, 19932)This report claim that Africa needs not only good governance but better governments that will concentrate more on trade liberalisation and not on direct intervention. Hence, a proposal of the conversion of the monopolistic Africa states by IMF and World Bank into liberal democracies linked to enlarge and rejuvenated private sector and to build a reformed states institutional capacity are formulations of neo-liberal capitalist to teach poor nations the good o ld fashion fiscal discipline.To say in a clear statement, liberal economic theory is manoeuvre of the western capitalist to have continuous clutch on the underdeveloped countries championed by the Financial Institutions (IFIs). The major argument is that economic relaxation behavior has provided the flow of foreign investment into the underdeveloped countries, as the means of reducing trade and exchange restrictions. This idea was that in the process of homogenizing the political economy of every member states of the international community, the creation of a market society on a global scale is achieved (Biersteker, 1993).Professor Mason Gaffney, a renowned America economist stated that the neo-classical economics present us with choices often too hard a dilemma. According to him, these dilemmas are choices of sacrifices that are not favourable for government to undertake and at the same time developed. For efficiency, government essential sacrifice equity to attract business gov ernment must lower taxes so much as to cause the closure of libraries and starve the schools to prevent inflation government must keep a huge unfortunates rate of unemployment to make jobs government must chew up land and pollute the world to motivate workers there must be unequal wealth distribution and so on.These dilemmas have provided the satisfying reasons that contribute to the present poverty in the underdeveloped countries and these are by imposition of free market strictures on the underdeveloped countries by the powerful trans -national bodies (IFIs) which incarnate free trade liberalism as part of their governing ideology. They lock peripheral states into agreement which forces them to lower their protective barriers thereby preventing the underdeveloped nations from developing trade profiles which turn from the model dictated by their supposed comparative advantage.Burchill et al, (1996) stated that the IMF and the World Bank for example, are responsible for the provi sion of finance assistance(or more accurately debt) to underdeveloped societies upon