Nigeria rules out IMF monitoring

Financial Times, Tuesday 3 August 1999

Finance minister insists there is unequivocal commitment to reform, writes William Wallis

Nigeria's new government has ruled out British proposals that International Monetary Fund officials monitor the handling of finances from within the central bank, according to Adamu Ciroma, the finance minister.

Mr Ciroma - a veteran politician from Nigeria's Moslem north who was appointed to a civilian cabinet in June - said in an interview with the Financial Times that there was no reason to doubt the government's commitment to economic reforms, such as the privatisation of ailing state-run industries.

He was also in favour of measures to improve government transparency, which, together with the reduction in the budget deficit, will be vital to Nigeria's chances of reaching a possible $1bn standby agreement with the IMF.

The World Bank, he said, had already begun an audit of the Nigerian National Petroleum Corporation, which has been at the centre of state-sponsored corruption in the past.

But there were differences with the IMF over the pace of some reforms and he described the suggestion from Nigeria's largest creditor, Britain, that IMF officials monitor the central bank in return for debt relief, as politically unacceptable.

There are no serious disagreements but there are certain things we want to do, that they want us to do now. According to our programme, we want to do them in the year 2000, such as deregulating the price of petroleum products, he said. Price increases now will be politically difficult to administer.

Nigeria is facing its worst economic crisis since independence after 15 years of military misrule, which ended in May with a last-minute slew of oil contracts and a ballooning deficit.

Last week, IMF officials visited Nigeria for the first time since the military handed power to an elected president, Olusegun Obasanjo. They said they were impressed by the commitment with which he had begun tackling corruption. They were also satisfied with revised budgetary targets, which aim to reduce the deficit inherited from the military by 90 per cent by the year's end.

But Nigerian officials said the IMF team expressed frustration with exchange rate controls, as well as subsidies on fertilisers and fuel, and went away until October without setting benchmarks for a deal. The most optimistic outcome would be a one-year standby agreement that would be in place by next year, leading to a $1bn loan and debt relief during its disbursement followed by partial debt cancellation under a longer-term IMF arrangement.

Two-thirds of Nigeria's estimated $30bn external debt is with the Paris Club. Private sector critics of the government fear that the rising world price of oil, Nigeria's main foreign exchange earner, may have reduced the incentive for structural reforms.

But there is also widespread acknowledgment that Mr Obasanjo faces a daunting task dismantling the patronage system that past regimes depended on, while convincing the impoverished population of the merits of an IMF deal.

The IMF has long been viewed with suspicion in Nigeria and even partial implementation of structural reforms in the 1980s led to rioting.

Having IMF monitors in the central bank assumes that we are incapable of doing our job. That kind of proposition is not acceptable, Mr Ciroma said.

We want to do the right thing on our own account not because the International Monetary Fund or the World Bank or anybody else wants us to do it, he added.

His immediate priority has been to clean up the mess left by the military, he said, and to attempt to restore macro-economic stability so Nigeria is on a firmer footing at the start of the new millennium.