- Jega Advises FG To Reject IMF, World Bank’s Anti-People Policies
Following scathing criticism from several quarters over its role in the current economic hardship experienced by Nigerians over its advice to the federal government of Nigeria on subsidy removal and foreign exchange reforms, the Fund has stated that it stands by its advice.
The Bretton Wood Institution disclosed that its advice on foreign exchange (FX) rate and subsidy removal was necessary for Nigeria’s macroeconomic stability.
The Washington-based institution reiterated its stance on its policy recommendations to Nigeria in an email to Premium Times on Wednesday.
The Nigeria Labour Congress (NLC), on October 28, criticised the international “lender for its denial” of responsibility regarding the Nigerian government’s recent removal of the subsidy.
READ ALSO: Fuel Subsidy Removal, FX Unification: It Wasn’t Us-IMF
Speaking on the matter on Wednesday, the IMF said it assessed Nigeria’s petrol subsidy and foreign exchange rate policies prior to the recent reforms but did not consider it “cost-effective”.
“Regarding the petrol subsidy, based on our research and international experience, we do not see this as the most cost-effective way of providing relief to Nigerian citizens,” the lender said.
“This is mainly because the petrol subsidy benefits not just low-income households that need government support, but also high-income and wealthy Nigerians who do not need this financial support from the government.
“Moreover, there is evidence that a share of the subsidised petrol was smuggled to neighbouring countries, where petrol prices were much higher. This means that the petrol subsidy benefitted not only Nigerians but also the citizens of neighbouring countries.
“Thus, removing the petrol subsidy should free resources that the government can allocate to other priority spending items, including social protection, health and education spending, and infrastructure investments.”
The IMF said the fixed exchange rate policy in operations before the recent reforms, was equally not sustainable.
“We have also assessed the viability of the fixed exchange rate regime that Nigeria pursued until mid-2023,” IMF added.
READ ALSO: IMF Tips Nigeria’s Economy To Grow By 3.2% In 2025, Inflation To Drop To 25%
“At the time, not all dollar demand from Nigerians was being met at the official exchange rate. Instead, many Nigerians had to turn to the parallel market and pay a premium of around 60 percent to acquire dollars.
“This means that until mid-2023 some Nigerians were able to purchase dollars at the official rate of around N460 to the US dollar. But many others, at the same time, could only purchase dollars at the parallel market rate of around N750 to the US dollar.
“While some people were able to transact at a subsidized rate, many others had to pay a much higher price. This also put pressures on the CBN’s reserves and was not sustainable.
“By allowing the naira to be determined by market conditions, everyone now has access to US dollars at the same price.”
On whether the criticisms could lead to the lender’s withdrawal from the country, IMF said its advice was to all its member countries, as summarised in its annual report on each country.
“We stand by our advice, though it’s important to underscore that individual pieces of that advice cannot be viewed in isolation,” the multilateral added.
“Our advice is a comprehensive policy package where all elements are linked to each other. That package seeks to ensure macroeconomic stability and raise living standards in a sustainable fashion.
“Importantly, our advice on petrol subsidies and the exchange rate, is set in a larger, comprehensive policy mix that also includes scaling up social transfers to provide relief to Nigerians who are already suffering from a cost-of-living crisis or who are impacted by policy reforms.”
The IMF also said governments “listen to advice from many corners and then decide on the best course forward”.
Meanwhile, former chairman of the Independent National Electoral Commission, INEC, Prof. Attahiru Jega, has advised the Federal Government of Nigeria to reject anti-people advice offered by the Bretton Woods institutions – the World Bank and the International Monetary Fund, IMF.
Ripples Nigeria reports that IMF had come under scathing attack by many in Nigeria for advising President Bola Tinubu on present economic policies, especially the removal of subsidy from PMS as well as the floating of the naira, which have plunged the country into inflationary pressures.
The hardship in the country has been blamed on the ‘anti-people’ policies suggested by the World Bank and IMF.
But the IMF’s African Region Director, Abebe Selassie, had, at a briefing on the sidelines of the just-concluded IMF and World Bank Annual Meetings in Washington DC, US, claimed that the organisation did not advise Tinubu to remove fuel subsidy.
“The decision was a domestic one. It was President Tinubu’s decision. We don’t have programmes in Nigeria. Our role is limited to regular dialogue, as we have with other nations like Japan or the UK,” he said.
Reacting to this, Jega said while it is good and useful to engage with the institutions, the government must be careful not to plunge the country into a long-term problem.
The former INEC boss gave this advice while speaking at the ongoing 2024 Annual Directors’ Conference with the theme, ‘Good Governance as a Catalyst for Economic Recovery, Growth, and Development’, organised by the Chartered Institute of Directors of Nigeria, CIoD on Wednesday.
He also called for a reform of the leadership recruitment process, saying the major challenge confronting Nigeria is that most of the leaders are not prepared for leadership.
Jega advised Nigerians to pay serious attention to nurturing and entrenching democratic governance, rather than merely good governance, as being promoted by the World Bank.
“This is the only way to place Nigeria on a sustainable trajectory of what I call ‘People-oriented development processes.’
Jega reiterated that while it is good to engage the World Bank and other organizations, “we should not swallow hook, line, and sinker what they bring to us”.
“We must be very careful in terms of what measures they have suggested to us because if we don’t do that we may advertently or inadvertently fall into greater medium and longer-term problems even if we think we are seeing short-term benefits from that kind of engagement,” he stressed.
