However, there was a long drawn-out debate but the IBB regime eventually capitulated and went down that route. The SAPs were based on the following pillars, which on the surface seem to be not so bad. right?
1. Privatization
2. Trade liberalization
3. Deregulation
4. Austerity measures
5. Reduction of government spending
However, by World Bank's admission in 2019 almost 30 years later, the World Bank's then-President, David Malpass, acknowledged that the bank's past policies may have exacerbated inequality and harmed some countries. While not a direct apology, this statement marked a shift in the bank's stance.
The marked failures of those policies include;
1. Increased poverty and inequality.
2. Reduced social services and public investments.
3. Weakened local industries and economies.
4. Environmental degradation.
5. Loss of sovereignty for borrowing countries.
Drilling down to Nigeria, in specific terms, SAP was meant to achieve the following
1) Diversify the economy away from oil.
2)- Reduce dependence on imports,
3)- Improve the efficiency of the public sector,
4) Increase the growth potential of the private sector.
What were the results?
It completely destroyed the manufacturing base of the economy, increased poverty astronomically, and never achieved a reduction in import dependence rather it worsened it. However, it was not all doom and gloom the deregulation brought about the second-generation banks in Nigeria,90% of those banks got their licensing during the period while minting new billionaires along the way and hereby financializing the Nigerian economy. Till today perhaps the only thriving sector is the finance industry while the real sector struggles. In the final verdict, only 0.5% of the set target was achieved.
In 2024 we are now on that route again this time with more viciousness and little to no opposition. Massive devaluation of the currency to reduce imports, subsidy removal to free up government revenues, etc. In a recent speech by the World Bank Senior Vice President, Indermit Gill, he posited that we need to sustain the reforms for at least 10 to 15 years.
He further said "Today's fiscal and monetary reforms are inevitably hurting everyone especially ordinary Nigerians who are struggling with high prices of food and transport. “The government must do everything in its power to protect the most vulnerable citizens against hardships because their lives and the lives of 110 million children depend on it. The exchange rate that Nigeria now has is the most effective in 20 years.
It is a great opportunity. You must build foreign reserves as a buffer against oil volatility. Again, I think Governor Cardoso is doing many of these things and I think he should be encouraged".
However, what are the facts so far?
1) Inflation has ballooned to least 35% according to NBS, but at least 200% in reality,
2) The poverty rate ballooned from 115 million in 2023 to 129 million in 2024, which means that 14 million Nigerians have become poorer in the last year.
3) Naira amongst the worst-performing currencies globally, depreciated by approximately 43% year-to-date, ranking it among the weakest currencies alongside the Ethiopian birr and the South Sudanese pound. According to World Bank reports.
4) Massive devaluation whipping out at least 100Trillion from the Nigerian economy and the purchasing power of Nigerians
5) Trillions in FX losses declared by companies hereby denying the country of potential tax revenues
6) Increased out-of-school children due to parents inability to send their children to school
Where do we go from here?
1) Before the massive devaluation, the same World Bank and economic experts projected that the real value of the Naira was around 750 naira today it hovers around 1,700. Was the World Bank and economic experts off the mark again? Again some economic experts have posited that the real value of the Naira is now 950-1000 based on PPP ( Purchasing Power Parity). So is the Naira currently at 1,700 undervalued and Nigerians being made to pay more? Is this not a self-inflicted injury?
Countries like China sometimes manipulate their currencies to lower their value to make their exports cheaper. Do we have that luxury has a largely import dependent economy? In my opinion, the Naira is currently undervalued, the current pricing was fueled by speculation during the botched floating of the currency before CBN decided to halt the slide into the abyss and we are all being made to pay for it, which is a form of taxation on all Nigerians. It triggered the worst inflation in a generation, whipped whatever gains from the initial removal of Petro susidy and we ended up paying more subsidies.
2) How do we mitigate these issues:- We are far too gone on these policies and a wholesale policy reversal at this point will do more damage. However, there are quick wins to mitigate the effect on the people. The Presidential committee earlier in the year had recommended the pegging of custom duties to N800/1$. Since the real value of the naira is around N1,000 what is stopping the govt from pegging the customs rate to N1000, are they prioritizing additional revenues from customs duties over inflation on Nigerians? Also, the current rate Nigerians are paying for petrol is still based on this overpriced dollar rate. What stops the government from pegging the crude oil sales to Dangote and other local refineries to N1k which in my estimation will reduce the current pump price by at least 30%?
In the final analysis, World Bank policies are not good or bad in their entirety. We can pick and choose what is useful to us taking into cognizance our peculiarities. Their one-size-fits-all policies across the world and the embedded hypocrisy in terms of wholesale susidy removal recommendation, while in their home counties, they have all sorts of subsidies to protect the poor. If you throw in conspiracy theories of being a Western tool to keep the global south down, then our government needs to be more circumspect in dealing with them.
Oladapo Kasumu Public Affairs Analyst, writes from Lagos
oladapo.kasumu@gmail.com
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