Comments on CBN Ban:How IMF and World Bank’s Policies Destroy African Economies

[Hydrogen]

August 23rd, 2016

For the longest time Africa has been labelled the impoverished continent with unforgivingly big debt corrupt leaders and failed leadership. For our part, we have largely apportioned all the blame on neo-colonialism and forgotten to take responsibility for our own misgivings. However, the greatest failure has been the ignorance of the West to its own contribution to this poverty that had been reduced to a catch line on television. The IMF and the World Bank’s Washington Consensus, the neoliberal policies these two institutions promoted have not yielded the results they were billed to yield. If anything, these two institutions have been at the fore-front of the systematic destruction of African economies. It is only now that their Highly Indebted Poor Countries Initiative has been seen to attempt to rectify past wrongs but the program has only impacted 36 countries in the world, and is this enough?

The danger of Structural Adjustment Programs to Agriculture in Africa

The Structural Adjustment Programs of the IMF and World Bank’s results in Africa have been far from desirable. In essence, they have caused the much publicised poverty. Though put in place to start a spiral of growth and prosperity, Foreign Policy in Focus says “structural adjustment saddled Africa with low investment, increased unemployment, reduced social spending, reduced consumption and low output, all combining to create a vicious cycle of stagnation and decline.”

The IMF and the World Bank have pushed for economies where the government has less control over the market. This is the main theme of the Washington Consensus and the hope is where governments are pushed out, private players will come in, offering competitive alternatives which could not have seen the light of day before. Though theoretically sound, in practice, the IMF and World Bank cooked up a suicidal approach to African economics. For example, in agriculture, the two institutions encouraged that governments scrap subsidies and lower agricultural research. The Economist, a normally pro-private sector publication admitted, “But many of the private firms brought in to replace state researchers turned out to be rent-seeking monopolists.”

In the 2008 World Development Report, the World Bank itself admitted to structural adjustments dismantling the elaborate system of public agencies that provided farmers with access to land, credit, insurance inputs and cooperative organisation. The Bank further admitted the expectation was that removing the state would free the market for private actors to take over which would in turn reduce state costs, improve quality and eliminate bias. However, the Report says, “The private sector emerged only slowly and partially- mainly serving commercial farmers but leaving smallholders exposed to extensive market failures, high transaction costs and risks and service gaps”

The aggregate of all these problems the Bank and the Fund created, is a less competitive African industry while the United States of America and Europe subsidise production and sell their produce at a fraction of the cost of African products. The more the IMF encourages this structural adjustment, the more it weaker and opens it up the market to Western invasion.

This situation is exactly what then US Agricultural Secretary, John Block hoped to create in 1986 when he said, “The idea that developing countries should feed themselves is an anachronism from a bygone era. They could better ensure their food security by relying on U.S. agricultural products, which are available, in most cases at lower cost.” It is all too clear now that through these structural adjustment policies, Africa could have become a glorified market for the U.S.A. and her friends.

The IMF and World Bank’s disrespect for African governments

The IMF and the Bank have not only dealt with African countries but have been known to have influenced policy reforms in Latin America and Asia. The approach was somehow different in these regions as the institutions advocated for the removal of the state from the economy and managed the process from above. However, in dealing with Africa, their strategy changed. Instead of the traditional macro-management, the institutions have been seen to go down to the smallest details of the processes the call for. A particularly worrisome example is Malawi in 2002. Then President, Bakili Muluzi accused the IMF of forcing Malawi to sell its grain reserves just before a devastating drought resulting in untold suffering in the country. The IMF is said to have instructed Malawi to sell maize from strategic reserves to enable repayment of commercial debts. The National Food Reserve Agency of Malawi ended up selling almost all of its grain and when the drought hit the country, there were no reserves to cushion the country leaving around 3 million people exposed. Why did the IMF go down to the specifics of what to do yet such brazen arrogance was never seen in Latin America or Asia? This disrespect for African governments is problematic and cannot be tolerated. Citizens elect their governments and not the IMF. Where these governments want to go through with the World Bank or IMF’s structural adjustment programs, the direct implementation should be left to the government structures. Micro-management is disrespectful.

The Fund and Bank’s involvement in Africa has come with increased debt in most countries. It maintains the status quo in global affairs. These institutions help keep poor countries poor. When they succeed in transforming countries from their debt ridden third world statuses to better fortunes, then maybe there will be a legitimate case for their existence. The Highly Indebted Poor Countries Initiative is hopefully a step in the right direction but as it stands, the IMF and World Bank are not two institutions to trust with African economies. It is either they are grossly incompetent to deal with their complexities or they are a part of some ploy to serve Western interests by destroying African economies.

https://www.africanexponent.com/post/7838-how-world-banks-policies-are-destroying-african-economies

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I think this is content more should read to put the central bank of nigeria crypto ban into perspective. The narrative of events illustrated here is one puzzle piece which can help to understand the complete picture. Similar items which led to the destruction of african economies are being implemented in the united states now.

Leaders say they will do something that benefits everyone. Details of it will be implemented in a way which carries an opposite effect. Minimum wage in the USA is a good example of this. Many american restaurants and businesses are heavily stressed by high taxes and bad regulation. Which guarantee they will file for bankruptcy if the minimum wage is lifted. Higher minimum wage is promoted as a good thing which will benefit america. In reality, its implementation in california has only destroyed businesses and killed jobs.

Can these measures be attributed to incompetence or malice is one question. But there are many others, which may be answered in time.

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[davis196]

What's the connection between IMF and World bank policies in Africa and the Nigerian central bank crypto ban?
I don't see such connection.
It's not a secret that IMF and the World bank are full with incompetent clerks,who don't know how to manage the economy of a country.Africa will be better off without the help of such global organizations.
The higher minimum wage in USA will destroy the businesses,that aren't competitive enough.This might be bad for those businesses,but in the end of the day,minimum wages can't be kept low forever.

[Kittygalore]

Even if the IMF and World Bank are the reason for destroying African Economies, we can't just brush the fact that some leaders on African countries are corrupt and will violate the rights of their citizens. The problem isn't solely on the bankers that are manipulating the puppets behind the back, the people of a country is responsible for who they put on that seat so if they were to put someone that is corrupt then it is also their fault.

The higher minimum wage in USA will destroy the businesses,that aren't competitive enough.This might be bad for those businesses,but in the end of the day,minimum wages can't be kept low forever.

An increase in the minimum wage does not hurt the business, it hurts the businessmen that are profiting billions of dollars every year. Look at Dan Price, with his company having a huge wages for his employees, the productivity and their revenue increased a lot of times and that is because his employees are given a living wages enough to save money. There should be a dramatic increase in minimum wages because the gap of the last increase in minimum wage and the inflation is so wide that a puny amount will not be enough.

[DapanasFruit]

As I am reading the post above, at the back of my mind I am trying to connect how the incompetence of some international financial bodies in managing and helping the African economies to the recent banning of cryptocurrency involvement of banks in Nigeria. Actually, the IMF and World Bank has nothing to do with the recent pronounced policy and as far as I know these financial institutions have not done anything substantial against cryptocurrency so far. Now, talking about the many problems and challenges of many African countries, I believe that there are so many factors why a country can successfully get out of poverty and equally the same number of factors why it can remain in the mud. The leadership, the culture and the drive of the people always count at the top. Now, if you are a country which got a strong leadership and your people are working hard for a vision shared by the many, you actually do not need much help from IMF and World Bank. Of course, things are easier said than done and that can be another factor here.

[slaman29]

IMF and World Bank also destroyed us in Asia. But instead of blaming them, blame our own corrupt governments.

An increase in the minimum wage does not hurt the business, it hurts the businessmen that are profiting billions of dollars every year. Look at Dan Price, with his company having a huge wages for his employees, the productivity and their revenue increased a lot of times and that is because his employees are given a living wages enough to save money. There should be a dramatic increase in minimum wages because the gap of the last increase in minimum wage and the inflation is so wide that a puny amount will not be enough.

It never hurts the businesses. If business can't afford to pay minimum wage, they shouldn't be in business. If all the profits come because you cut corners from production and wages, then you're not running a good business. Min wage respects the quality and expertise and skill that goes into producing something (product or service).

[Hydrogen]

What's the connection between IMF and World bank policies in Africa and the Nigerian central bank crypto ban?

Hungary receives rescue package, with strings attached

Oct 2008

International Monetary Fund, European Union and World Bank join together for £15.38bn bail-out

The International Monetary Fund, the European Union and the World Bank announced a massive rescue package for Hungary today, in an attempt to save central Europe's former economic powerhouse from bankruptcy.

https://www.theguardian.com/business/2008/oct/29/hungary-economy-imf-eu-world-bank

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Hungary Asks IMF to Leave The Country

July 15, 2013

BUDAPEST—Hungary's central bank on Monday asked the International Monetary Fund, which helped rescue the country from the brink of insolvency in 2008, to close its Budapest office, as authorities here seek to reassert their sovereignty ahead of national elections next year.

https://www.wsj.com/articles/SB10001424127887323664204578607792869637804

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I think news stories above summarize the relationship between IMF & world banks. And the situation in nigeria accurately.

Hungary booted the IMF out of their country in 2013. For the same reasons nigerians could want the same policy implemented in 2021.