Imperial Overstretch Vs Local Champions

Imperial Overstretch vs. Local Champions

Last October in New York, I came across an article by Joseph Kahn in the business day section of the New York Times on the International Monetary Fund's heavy hand. Morris Goldstein a 25-year IMF veteran using the fund's unpublished data conducted a study upon which the article was based. The finding "suggests that recent criticisms of the IMF may have actually underestimated the fund's commandeering approach'' The focus of the study was on the high profile bailouts in Indonesia and Russia where 140 and 200 changes respectively were imposed as a condition to bailout funding. Mr. Goldstein concludes from his study that both the scope and depth of these conditions are excessive. He states further: "They clearly strayed outside their area of expertise. If a nation is so plagued with problems that it needs to make 140 changes before it can borrow, then maybe the fund should not lend''.

Operational ineffectiveness is another key issue. The study also shows very low compliance rate with lending conditions. In the celebrated Indonesian case compliance was a paltry 20 per cent.

It is no longer news in developing countries on the IMF's role and how it impacts lives. The latest waves of critics are now from developed economies. Accusation of imperial overstretch range from; taking advantage of developing nations at a time of need to get concessions, which they will otherwise not make, and the Group of Seven wealthy nations controlling IMF policy, in the process using the fund as a change agent in developing countries. To summarize in Joseph Khan's words. "The fear is that the IMF has been acting like a heart surgeon who, in the middle of an operation decides to do some work on the lungs and kidneys too."

The most important aspect of the study's conclusion for me is that the IMF has not been successful in Africa, more so in Nigeria. This is a revelation considering the influence it wields in Nigeria's economic policy formulation. The basic fact of life for Nigerians is that we will not see an improvement in our condition with the projected budgetary economic growth rates. For our lot to improve, we have to double the rate of investment as a percentage of our Gross Domestic Product (GDP) that is currently below double digit to stimulate and grow the economy at a sustainable rate of 8-10 per cent per annum. This is a fundamental benchmark. How do we achieve this growth?

Enter the local champions. Ignore them at your peril. They usually start as mere mortals that become transformed by influential government appointments and elected political positions. Overnight, they achieve superstar status and live comparable lifestyles funded by taxpayers, seeking recognition at every opportunity. Due to patronage, they breed charlatans and sycophants who hold on to every word. In most cases their more recognizable trait is the display of ignorance with acute arrogance. The most dangerous species has been in government all his or her life. They pretend to be private sector operators but find ways and means back into government to nourish their so-called private sector business interests. The one thing they have in common; they all report to Mr. President in Abuja, who controls the Budgetary Allocations.

Against this background, what happens when Imperial Overstretch (10) encounters the Local Champions (LC)? (10 for the purpose of this discussion is the World Bank Group). LC and 10 hold the key to our economic growth and development: how have they performed? In all areas, 10 has outperformed and outmanoeuvred LC. In competitive terms, the score-line out of 41 matches played since independence, 10 has recorded 40 wins and one draw. The draw was recently recorded at the successful GSM auctions. Victory was denied LC as 10 provided a technical adviser to help coach the LC team. What has plagued LC over the years has been team selection. While LC has capable players of international quality, the lack of a merit-based system influenced by national character, settlement, frequent change of the head coach, ethnicity and mediocrity has been the bane of LC. 10 has on the other hand presented solid team that unfortunately always have our Nigerian nationals, have been better organised, well prepared with good strikers. Our LC teams never stand a chance against them. They have given us loans that we have wasted on white elephant projects, when we got stuck and oil prices dropped, they sold us the Structural Adjustment Programme, which we mismanaged and now they are advising and funding our privatisation programme. In the whole process, we have amassed a staggering $30 billion debt burden. I should also point out at this juncture that 10 did not put a gun to our head to draw down on these facilities. The basic principles of finance suggest that if you use debt to finance your development or projects, you must be expecting value in excess of the debt. We should ask LC what they did and why we have not received value . After all money was obviously spent.

The way to achieve growth in our economy and better the lives of our populace is to open up the economy and make government less attractive by privatisation. Secondly, there is need for civic empowerment.

The head of state has over 8,000 appointments he has to make, and the choice ones are into the parastatals and businesses government has no clue how to manage. Politics determines the running of critical sectors of the economy such as power, telecommunications, petroleum refining and distribution. Nigeria now wonders why there is no petrol, light, water, phone and kerosene. Once government get rids of this burden, it can focus on providing social infrastructure such as health and education.

We have seen this happen in the banking industry where mistakes have been made and learnt. Privatisation or deregulation must occur with a strong body. The Central Bank is now empowered to play this role and the government collects 25-30 per cent of all the billion Naira profits banks make without lifting a finger, in the form of taxes. The indirect benefit is the ripple effect in creating jobs within the economy.

The opening up of the telecomm sector with the GSM bid is another example. Within a three-month period, direct benefits to the tune of $1 billion equivalent of a quarter of this year's capital expenditure budget accrued to the government. Indirect benefits to the economy will total over $4 billion of investment in the economy over the next four years creating jobs in the process.

In these examples not a single dime was government money. As a matter of fact government made money. We have to move away from the era of government funding, contract and patronage. Opportunities also exist in other sectors of the economy such as power, solid minerals and refining. When this process is complete, government will become less attractive and the rush to serve will reduce.

This is why the ongoing privatisation exercise is crucial. 10 is playing against the LC's at the Bureau of Public Enterprise. The score is already 2-0 against LC and we are at half time. 10 is funding and advising the BPE. On the advisory side, 10 is using its libero. If my firm were to be in that position, they will call me offside, stating conflict of interest. In this case no body is questioning the role of 10 as both a funding agency and advisory body. The Nigeria Airways privatisation and the controversy surrounding it, it a classic case of this 10 conflict of interest. The match is however not lost, a victory is imminent if the LC's and the BPE regroup. 10 is venerable and the BPE have to beef up their squad. They have a good striker and captain, but a tree cannot make a forest. They need seasoned midfield players that can tackle, hold the ball and make intelligent passes to the striker for goals.

The political side has to do with civic empowerment. The quality of our legislators leaves a lot to be desired. The Nigerian citizen has to understand the importance of his vote and not to trade it for rice or cash. The legislators have now realised that they do not control budgets nor have direct access to cash. They are lawmakers. They are envious of common local government chairmen that control budgets and can dispense contracts, not to talk about almighty governors. The next elections will be keenly contested and it is important that we elect sound Nigerians that can put in place enabling laws that will free up the economy and better the lives of people. Politicians beware civic empowerment now!

Machiavellian talks about the difficulty of change as those who benefit from the existing order will resist and other groups are skeptical. The change agents have an uphill battle, but it is clear that we need and have to put in place, a first eleven that will stem the tide and make a difference. 10 is not the problem, our LC have always been. It is time for our first win.

Adebajo is an investment banker and owner of The Flaming Flamingoes Football Club of Lagos. He was on the Presidential Policy Advisory Committee on Financial & Economic Matters.