0115 966 7955 Today's Opening Times 10:00 - 20:00 (BST)

The involvement of IMF in the Economic development of Nigeria

Published:

Disclaimer: This essay has been submitted by a student. This is not an example of the work written by our professional essay writers. You can view samples of our professional work here.

Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.

Has the economic integration and trade liberalisation of Nigeria by IMF enhanced its economic development?

Research Issue: This question has contested several evoking and vigorous answers- following the ambiguities and contradictions of the IMF concepts that have riddled its purpose, and has therefore, created an enormous uncertainty and complexity which evidently is raising new anxieties and threats to human security and development especially in underdeveloped economies.

Method: My main source of information will be from secondary data such as: Google books, articles, books and journals. I will apply a qualitative method approach.

Purpose: The objective of this term paper is to analyse some economic indictors such as GDP, inflation and other economic variables from these secondary data to see if the integration and trade liberalisation of Nigeria by IMF has enhance the economic development of Nigeria or rather distorted its development.

Keywords: Globalisation, Economic Development, IMF, Nigeria, GDP, Economic growth, Inflation, dependent theory, Liberal Theory,

Abbreviations

GDP: Gross Domestic Product

SAP: Structural Adjustment Programme

OECD: Organisation for Economic Co-operation and Development

GATT: General Agreement on Tariffs and Trade

WTO: World Trade Organisation

IMF: International Monetary Fund

CBN: Central Bank of Nigeria

NEEDS: National Economic Empowerment and Development Strategy

MNCs: Multi National Companies

LDCs: Least Developed Countries

PRSP: Poverty Reduction Strategy Programme

FDI: Foreign Direct Investment

OAU: Organisation of African Union

MAN: Manufacturing Association of Nigeria

NEITI: Nigerian Extractive Industries Transparency Initiative

NACCIMA: Nigeria Association of Chambers of Commerce. Industry, Mines and Agriculture

NIEC: National Economic Intelligence Committee

NASSI: Nigeria Association of Small Scale Industrial

1. INTRODUCTION

The economic of Nigeria and as other British colonies has been under great influence dating back to 1846 when the protective barriers or duties on agricultural imports were abolished. By 1860, all trace of restriction on trade and tariff restrictions were removed and an era of free trade imperialism treaties begun .The imposition of the Free Trade by the British on its colonies and informal empire to obligatory maintain low tariffs by treaties with the chief aim of reducing their sovereignty in commercial matter and giving extraterritorial right to foreigners (Angus Maddison, World Economy, April 2001).

The two world wars shattered this liberal order and caused the collapse of capital flows and the beggar-your-neighbour trade system. However, by 1950 to 1973 a significant fast growth in the world economy was recorded and that era was referred to as the golden age. This growth was due to several reasons but mainly because of the creation of a liberal international order by advanced capitalist countries with explicit and rational codes of behaviour and institutions for co-operation (OEEC, OECD, IMF, World Bank and the GATT) in order to avoid the incur of the beggar-your-neighbour behaviour of the pre - war years(Angus Maddison). However, Nigeria and the rest of the 168 countries of the world were considered 'falter' in their economic development because of the alarming deterioration in economic performance of these countries after the golden age. This liberal international order is known as globalisation today.

The issue of the 'faltering economies' of this heterogeneous group of 168 countries has brought questions, opinions and views of pros and cons of globalisation. Some believe that globalisation has made the world healthier while other believes the contrary. Theodore Leavitt(1983) to explain globalisation market state that ''We live in a rapid globalising world and certain national identifiers like taste, technology, market and finance are no longer constrained by national boundaries. They operate on a global basis. The defining features of globalisation are interdependence and connectedness of the economics, politics and culture of nations and not uniformity of markets and taste of a single country'' (Yong M, 1989).

The more these economies integrate, on the one hand; the more new ideas about politics, education, entertainment and services and expansion of local culture perimeters are reinforced and diffused. On the other hand, the international network becomes increasingly complex and unpredictable. Beside, as is known fact that, virtually all humans are ''opportunistic''; hardly would nations work together and not want to outwit one another either to gain an economic, social or military advantage.

While considering the complexity of economic growth through integration. The question will be, is it possible for underdeveloped economies to transform into vibrant economies for growth and development amidst this complexity? Well, base on the complexity and competitiveness of the developed economies over those of the underdeveloped economies and the implicit backing of these developed economies by international global institutions such as the OECD, WTO, GATT, IMF, and World Bank, a sustainable economic growth of these underdeveloped economies is slim. This has aroused great criticisms and close examination of the impact of globalisation on the development process of these underdeveloped economies because of the continual retardation of these economies. This persistent situation has resulted to the debt crisis of many of these economies and had led to sheer poverty, squalor, deprivation, frustration and worst political instability.

1.1 Globalisation

The term "globalisation" is frequently used but seldom defined because of the vast interpretation of its phenomenon and perhaps its multiple manifestations of its prevailing trend. It has become a buzzword of the century often use to describe everything that is happening in the world today. Since its advent, a once thought big world is made into a much smaller place - where the interaction between different countries and economies of the world are increasingly integrated by factors like internet, TV, radio and mobile phones and the creation of institution like World Trade Organisation (WTO), World Bank and International Financial Institutions (IFIs) has expanded international trade and also portfolio of investment such as foreign loans, international policies

Brittan (1998:2) viewed globalisation "as a whirlwind of relentless and disruptive change which leaves governments helpless and leaves a trail of economic, social, cultural and environmental problem in its wakes."

My own interpretation of globalisation is that:

"Globalisation is the marginalisation of the underdeveloped economies by the developed economies for their self sustainability purposes."

1.2 Research Question

Has the economic integration and trade liberalisation of Nigeria by IMF enhanced its economic development?

1.3 Research Issue

This question has contested several evoking and vigorous answers- following the ambiguities and contradictions of the IMF concepts that have riddled its purpose, and has therefore, created an enormous uncertainty and complexity which evidently is raising new anxieties and threats to human security and development especially in underdeveloped economies.

1.4 Research Objective

The objective of this term paper is to analyse some economic indictors such as GDP, inflation and other economic variables from these secondary data to see if the integration and trade liberalisation of Nigeria by IMF has enhance the economic development of Nigeria or rather distorted its development.

1.5 Paper Design

There are about six different research designs (Philosophical, Literature review, and Case study, Survey, Evaluation and Experiment) but I will be choosing two among these six research designs.

Philosophical: it's often used to examine a research issue from another perspective because it is based on existing literature.

Literature review: this design aim at summering data already collected for a particular topic. When data are qualitative, the analysis of this data can create new knowledge and perspectives on the matter previously put forward.

2. PROBLEM STATEMENT

Nigeria, a country located at the trigger point of Africa and the envy of all African states was forecasted by economists to transcend ahead of most of the African states in her economic development to become the giant of Africa and the international economic trade centre such as Dubai, central Asia and China of today. These believe and forecasts were not just based on mere passive ideas but on concrete facts of the availability of natural resources, human resources and huge market base in Nigeria.

With the boost in agriculture and earning top dollar from the exportation of black gold, Nigeria discovered oil; the money spinner, at Oloibiri in present Bayelsa state in 1956. Nigeria got her independence in 1960 and was seen as "nature goes perfect" - blessed with good climate and vast fertile agricultural land almost twice the size of England with high human resource index and huge market base. With the abundant untapped natural resources, it was logical for anyone and not only economist to have thought that the involvement of "economics experts" such as the IMF and the World Bank in the running of Nigeria economy will accelerate its transition to attained socio-economic stability - being that these institutions main goals and objectives are to provide avenues for proper allocation of resources, monitoring of balance of payment, evaluating and rendering technical assistance through economic Structural Adjustment Program (SAP).

However, as the saying goes "…with great wealth comes greater problems". Today, the oil-rich Nigerian economy suffers from long hobbled political instability, corruption, inadequate infrastructure, and poor macroeconomic management. There is an acute growth in income poverty and worse of all, human poverty- this implies, the denial of choices and opportunities to live a tolerable life (United Nations, 1997) and the fundamental freedom of action and choice to influence key decision affecting their lives.

Apart from oil, the strength of Nigeria economy lies in its rich agricultural resource base. From the 1980s agricultural productivity was recorded to be on constant declination due to abandonment for oil and that gave raise to rampant rural poverty. This has rendered the economy vulnerable to external shocks which emanates from the fluctuations in world oil prices and the rising of imports prices, therefore creating an external and internal imbalances.

These imbalances manifested difficulty in balance of payment, unemployment and low utilisation capacity in all sectors, and deterioration in purchasing power. Between 1982 and 1994, the debt stock of Nigeria rose at an average rate of 17% - which means, stock of external debt increased by a factor of 33 in 22 years aside from domestic debt (Iyoha, 1997). Today, Nigeria's public debt is more than 75% of its GDP with the effective debt to export ratio being more than 200%. This ironically has shoot up Nigeria to be Africa's biggest debtor with about $ 28.5billion to its external creditor and debt service payments of $3.3billion in 2002 alone and that is expected to be on constant rise (Debt Management Office, 2002).

The growth rate of Nigeria external and domestic debt was 9.4% in 2002 against the GDP growth rate of 3.3% and the external growth rate of -6.7% with the average GDP per capita annual growth rate of -0.4%(CBN Annual Report, 2002).

Figure : Growth Rate of GDP, Income Per Capital and Total Dept

Source: CBN Statistical Bulletin 1999 and CBN Annual Reports and Statements of Accounts 2002

During the 1960s, Nigeria never observed double- digit inflation. By 1976, the inflation rate stood at 23%. It decreased to 11.8% in 1979 and gun shoot to 41% and 72.8% by 1989 and 1995 respectively which marked the early period of the IMF Structural Adjustment Programm (SAP).

Trend of gross domestic product of Nigeria at market prices

Table : Inflation, GDP and Exchange Rate

Year

Gross Domestic Product

US Dollar Exchange

Inflation Index

(2000=100)

Per Capita Income

(as % of USA)

1980

50,849

0.78 Naira

1.30

7.22

1985

98,619

2.83 Naira

3.20

1.87

1990

286,374

8.94 Naira

8.10

1.49

1995

1,928,642

54.36 Naira

56

1.28

2000

4,676,394

102.24 Naira

100

1.11

2005

14,894,454

131.01 Naira

207

1.96

For purchasing power parity comparisons, the US Dollar is exchanged at 150.00 Nigerian Naira only.(IMF)

Based on the impact of inflation, the per capita GDP today remains lower than in 1960 when Nigeria declared independence. By 2005, Nigeria's inflation rate was estimated to be 15.6 percent and the GDP was composed of the following sectors: agriculture, 26.8 percent; industry, 48.8 percent; and services, 24.4 percent. (NEEDS)

It is to be observed in the first graph; the growth in GDP from 1970-1978 was recorded to be 3.1% annually and 1972 to 1973 was the oil boom era; there was a remarkable growth in GDP of approximately 6.2% annually. However, in the 1980s to the 90s, Nigeria started to have negative GDP growth rates. This period constitutes the Structural Adjustment Program and economic liberalisation in Nigeria by the IMF and since then the economic has responded to a 4.0% positive GDP growth rate.

The aim of this paper is to analyse the impact of the structural Adjustment Programmes introduced by IFIs (IMF) through globalisation on economic development of the underdeveloped economies (Nigeria as case study). This will be by the application of two economic theories (dependency, liberal) and observation of the three economic development variables. The two economics theories will help to give more light on the analysis of the persistent poverty in the underdeveloped world, Nigeria especially, while the variables to demonstrate economic development. My choice of Nigeria as a case study is due to its idyllic background as a country of immense natural and human resources but 70% of its population live below the poverty line (World Bank). I will concentrate on IMF conditionality and its influence on the economic development of Nigeria.

3. LITERATURE REVIEW

3.1 Economic Development

There are numerous definitions for economic development as there are people who practice it. Economic development means different things to different people, which today makes the definition of economic development harder than ever in a more concrete and salient terms.

Gonçalo L Fonsesca at the New School for Social Research defines economic development as "the analysis of the economic development of nations."

The University of Iowa's Centre for International Finance and Development states that:

"'Economic development' or 'development' is a term that economists, politicians, and others have used frequently in the 20th century. The concept, however, has been in existence in the West for centuries. Modernization, Westernization, and especially Industrialization are other terms people have used when discussing economic development. Although no one is sure where the concept originated, most people agree that development is closely bound up with the evolution of capitalism and the demise of feudalism."

From other perspective, economic development involves the allocation of scarce resources - land, labour, capitol and entrepreneurship in ways which has positive effect on the level of business activity, employment, income distribution patterns, and fiscal solvency.

3.1.1 The Imperative of Economic development

Professor Dudley Seers argues development is about outcomes and development occurs with the reduction and elimination of poverty, inequality and unemployment within a growing economy.

The 21st century view of development encompasses a country's consensus to achieve sustainable growth, poverty reduction, gender equality, human development, environmental protection, institutional transformation and human right protection. To put it concisely, development is the ultimate aspiration of modern economies, it is the upward movement of a country's entire social system. More to the point, development is the removal of any host of undesirable condition that may perpetrate a state of underdevelopment.

Economic growth is a prerequisite for economic development. Facilitating increase in the output of major sectors of production of the economy, such as natural resource and manufacturing either by the improvement of the structural system such as technology, will lead to economic growth. (Todaro, 1994)

Kuznets (1971) defined economic growth as "a long term rise in capacity to supply increasingly diverse economic goods to its population; this growing capacity is based on advancing technology and the institutional and ideological adjustments that it demands"

The obstacle facing most of these developing countries is the ability to create a more conducive atmosphere for essential use and harnessing of economic resources. The obstacle has increase anxiety by the increase of economic liberalism that promotes free movement of capital that tends to undermine and marginalise indolent economies.

This interdependent global economic dispensation has given rise to disparities among countries of the world on the attainment of economic growth.

3.1.2 Growth versus Development

However, before I go further, I will like to state that; there is a considerable difference between economic growth and development. I may just frankly state that, economic development is a terminology used to refer to the underdeveloped countries and while economic growth refers to the developed countries.

Economists Peter Bearse and Roger Vaughan write that:

"

Development is a qualitative change, which entails changes in the structural system of the economy, including innovations in institutions, behaviours, and technologies which enhance growth,

While Growth is a quantitative change in the scale of the economy - in terms of investment, output, consumption, and income"

Amartya Sen state that:

"Development requires the removal of major sources of poverty as well as tyranny, poor economic opportunities as well as systematic social deprivation neglect of public facilities as well as intolerance or over activity of repressive states…."

Hence, on one hand, economic development can not be achieve without growth because it can be conceived as a multi-Dimensional process or phenomena-increase in per capital income, increase in GNP and improve living standard of the population but, on the other hand, growth is possible without development for the mere fact that it is measured as the increase in GNP, it does not have any other parameter.

3.1.3 Historical development of the term

To continue it will be necessary to show how this term 'economic development' has evolved over time to include a wider variety of variables and not just focus on economic growth.

Economic development is a term conceptualised as a branch of economics in the early 20th century in reverence to growth and industrialisation in the capitalist society by the classical school of economics. However, this school of thought did not put to consideration countries like Africa, Latin America and Asia but rather an opposite reflection of the developed world that will catch up in time. (History of Economic thought, 2008)

Economists after the World War II become more concerned about the low standard of living in so many countries, especially due to decolonisation. The aim of the term changed to include not only the Western world but also the less developed which in fact made most of the population of the globe. Therefore, important reservations were made as opposed to the ultimate objective of the study of economics to include other variable rather than only economic growth.

With fast change in the political geography of the world, the need for the formation of supranational bodies (IMF, OECD and World Bank) that would oversee the smooth progress of the developing nations became necessary. The responsibilities of these institutions are to work hand-in-hand with the local government of the underdeveloped nations to sustain and accelerate growth - speeding up progress of economic development of these nations.

Many believed that economic development started as capitalism but as time went by and changes occurred, the term shifted from capital oriented concept to identify human capital endowments developed by Schultz (1951) as the primary obstacle to the realization of the potential economies of scale inherent in the industrialization of developing countries. Singer (1964) contributed further more to this social development by including health and fertility into the picture. Incorporating elimination of poverty, inequality and unemployment in the equation by Dudley Seers (1969) gave a notable change in defining the term economic development

By 1977 Seers developed a structuralised theory which included social development and economic growth to the overall definition of economic development. As of this point, reservations were made for the third world countries because of the distinctive characteristic that differentiated them from the western countries.

Later on, privatisation was introduced such as foreign MNCs as a factor in the economic development of least developed countries (LDCs) by the Neo-Liberals in the 1980s. (History of Economic Thought, 2008)

Definition of Economic Development

I decided to put a definition of Economic Development that would best fit my analysis of a third world country.

Economic development is the fundamental process of increasing the factors of productive capacity- land, labour, capital, and technology -through sustainable growth from a simple, low-income to a modern high-income national, state or local economy. Its scope includes the process and policies of using its resources and powers to reduce the risks and costs which could inhibit investment but improves the economic, political and social well-being of its peoples.

3.2 Economic Theories

The crisis facing the underdeveloped countries can not be accurately and properly analysed without the examination of some theories underpinning the problem. These crises have triggered scholar and writers with different theories, explanations and research projects aimed at solving and bringing to light the causes and complexities surrounding these crises. (Baran, 1957, Frank, 1971) maintained that dependency theory is the best for understanding the causes of the crises. While others argue that development theory (Rostowe, 1960) or economic explanations (Offiong, 1980) give a more lucid view. Yet, there are others who contended that political explanations (Migdal, 1988) or the liberal theory (Burchil, 1996) is of most important.

For the purpose of this paper, I will consider the dependency and liberal economic theories

3.2.1 Dependency theory

The economy of Nigeria is in doldrums from the recent pandemic crisis of capitalism. Though it has always been a battered economy which has been suffering from a form of Dutch Disease socio-economic hardship and where the poor masses benefited nothing from the boom in the annals of Nigeria. Nigerians naively thought that for not being fully integrated into the world economy, they could at worst receive a mere scratch from this contagious capitalism crisis. However, this economic maelstrom was made truly global by globalisation.

Andre Gunder Frank, one of the earliest dependency theorists, made it quite clear on this point, ...historical research demonstrates that contemporary underdevelopment is in large part the historical product of past and continuing economic and other relations between the satellite underdeveloped and the now developed metropolitan countries. Furthermore, these relations are an essential part of the capitalist system on a world scale as a whole.(Andre Gunder Frank, "The Development of Underdevelopment," in James D. Cockcroft, Andre Gunder Frank, and Dale Johnson, eds., Dependence and Underdevelopment. Garden City, New York: Anchor Books, 1972, p).

3.

This view shows that capitalism promotes greed and blind pursuit of profit. The enforcement of international division of labour is the one proof but the most explicit manifestation of this doctrine is the 'Comparative Advantage' characteristic. This division of labour (dependent and dominant states) is largely responsible for the underdevelopment of large areas of the world. The osmotic act that occurs in this system provides at large an ultimate explanation for the persistence of poverty in these areas of the world. The dependent states are made to supply cheap minerals, agricultural commodities, and cheap labour and these economies also serve as the repositories of surplus capital, obsolescent technologies and manufactured goods. This flow of goods, money and service into the dependent states are considered functions which orient these economies towards the outside. However, these dependent states have little or no influence to determine the allocation of their resources; it is rather determined by the economic interests of the dominant states. This division is considered by the capitalist a necessity for efficient allocation of resources.

Dependency theory can be an explanation of economic development of a state in term of the external influences (political, economic, and cultural) on national development policies. (Osvaldo Sunkel, The Journal of Development Studies, Vol. 6, no. 1, October 1969, p. 23)

Dependency can be define with emphasis on historical dimension as… an historical condition which shapes a certain structure of the world economic such that it favours some countries (Dominant states) on the detriment of others(dependent) and therefore limits the development possibilities of the subordinate economics. This a situation which the economy of a certain group of countries is put under unfavourable condition by the development and expansion of another economy, to which their own is subjected. (Theotonio Dos Santos, Readings in U.S. Imperialism, 1971, p. 226)

However, there are serious disagreements among the various strains of dependency theorists. Although there are some core propositions which seem to underlie the analyses of most dependency theorist, nonetheless there are vigorous and challenging debates among the liberal reformers (Prebisch), the Marxists (Andre Gunder Frank), and the world theorists (Waller Stein) on the dependency theory.

3.2.1.1 The Core Propositions of Dependency Theory

There are contestable numbers of propositions, which form the core of dependency theory. I will take two out of these numerous propositions because the suit my paper:

1. Underdevelopment is a condition fundamentally different from undevelopment. The latter term simply refers to a condition in which resources are not being used, while Underdevelopment refers to a situation in which resources are being actively used, but used in a way which benefits dominant states and not the poorer states in which the resources are found.

2. The distinction between underdevelopment and undevelopment places the LDCs countries of the world in a profoundly different historical context such as "behind" or "catching up" to the developed countries of the world.

3.2.2 Liberal Economic Theory

Capitalism has failed to develop Nigeria, despite it huge natural and human resources. The Nigerians with necessary lesson incur from capitalism needed an alternative for economic -oriented revolution. The neo-liberal saw this as an opportunity to present itself as an economic alternative system for Nigeria and Africa as a whole. Since then, Nigeria has been compelled to swallow one economic prescription after the other such as IMF and World Bank imposed reforms; SAP (Structural Adjustment Program), PRSP (Poverty Reduction Strategy Papers) etc. and now NEEDS (National Economic Empowerment and Development Strategy), yet poverty still persist. The World Bank's seminal report title: Sub -Sahara Africa (1999) signified an ideology that retain both emphasis upon domestic sources of economic malaise and the faith in liberal economic policies which has a twin resemblance to belated centrality of state and accountable government to sustained the capitalist development.(Sandbrook, 1993:2)

This report claim that Africa needs not only good governance but better governments that will concentrate more on trade liberalisation and not on direct intervention. Hence, a proposal of the conversion of the monopolistic Africa states by IMF and World Bank into liberal democracies linked to enlarge and rejuvenated private sector and to build a reformed states institutional capacity are formulations of neo-liberal capitalist to teach poor nations the good old - fashion fiscal discipline.

To say in a clear statement, liberal economic theory is manoeuvre of the western capitalist to have continuous clutch on the underdeveloped countries championed by the Financial Institutions (IFIs). The major argument is that economic liberalization has provided the flow of foreign investment into the underdeveloped countries, as the means of reducing trade and exchange restrictions. This idea was that in the process of homogenizing the political economy of every member states of the international community, the creation of a market society on a global scale is achieved (Biersteker, 1993).

Professor Mason Gaffney, a renowned America economist stated that the neo-classical economics present us with choices often too hard a dilemma. According to him, these dilemmas are choices of sacrifices that are not favourable for government to undertake and at the same time developed. For efficiency, government must sacrifice equity; to attract business government must lower taxes so much as to cause the closure of libraries and starve the schools; to prevent inflation government must keep a huge unfortunates rate of unemployment; to make jobs government must chew up land and pollute the world; to motivate workers there must be unequal wealth distribution and so on.

These dilemmas have provided the solid reasons that contribute to the present poverty in the underdeveloped countries and these are by imposition of free market strictures on the underdeveloped countries by the powerful trans -national bodies (IFIs) which personify free trade liberalism as part of their governing ideology. They lock peripheral states into agreement which forces them to lower their protective barriers thereby preventing the underdeveloped nations from developing trade profiles which diverge from the model dictated by their supposed 'comparative advantage'.

Burchill et al, (1996) stated that; the IMF and the World Bank for example, are responsible for the provision of finance assistance(or more accurately 'debt') to underdeveloped societies upon the acceptance of the unilateral of free market rules for their economies, the conditionality of the so called - Structural Adjustment Programme 'SAP' (ibid).

3.3 The variables of Economic Development

3.3.1 Structural Change

Structural change is the key to economic growth (Anonymous, 2006). structural change means the accumulation of physical and human capital and the adoption, and adapting of existing technologies, substitution of imports and the entering of the world markets for manufacturing goods and services.

Structural change is the change in industry such as increase in service sectors that is detrimental to change in the structure of production with the aim to achieve overall higher economic growth leading to an increase in output and employment.

The most significant difference drawn between the developed countries and the underdeveloped countries is the absence of structural change. However, whenever there is a structural change, for instance technological innovation, it is consequently control by external forces such as MNCs. (Ibid)

3.3.2 External Influence on Government

With the world coming together economically (globalisation) under liberalism theorem, government strength are been reduced in the production sector and worse government can be influence by external organisations. External organisations such as the World Bank and the IMF as well as MNCs, have the potential to influence government and to rob it's of control in the state therefore causing a loss of legitimacy (Riddell, 1992). This loss of creditability by the state government can manifest a drastic side effect as political instability thereby leading to the reduction in effective implementation of economic development policies.

Miller (1992) outlined political and policy instability as the two type of possible side effect of External influence on local governments. Political instability is the potential change in the political system and the opportunities that evolve from such changes and while policy instability refers to the instability in Government policies.

Government participation in the running of its economic matters is the bedrock to effective measure to implement functional policies and to achieve stability. The major problem often observed in relation to the developing countries is the decline capacity of states to implement effective Economic development policies due to the profound impacts of the external force exerted on the state government by these organisations.

3.3.3 Environment Conditions

Environment conditions are the direct result of economic development. The change in the character of the environment is intertwined with increase in economic activities. The concerns for these changes, being it positive or negative, has become an issue in the last few decades and that has manifested an increase in the awareness on the role of global organisations.(Mastel 1999)

These environment changes are on the increase in the developing countries because of the increased participation of the international organisations activities. The increased activities in those economies have an impact on the local environment. The abundant mineral resources in these developing countries are the source of interest for business conduction to these international organisations.

These international organisations have the capacity and capability to influence local governments to implement policies that only favours profit maximisation and not for the betterment of the environment. This causes an adverse effect on the environment such as depletion of mineral and other natural resource, degradation of land, water And air pollution due to production and consumption activities.(Ministry of Finance, Bangladesh, 2004)

3.4 A Factor

Underdeveloped countries and the world economy can largely befit from the huge potential of globalisation, especially from the reform of international financial institutions such as WTO, IMF and World Bank (Stiglitz, 2001). Schumann (2001) asserted that this impact of globalisation on countries is through different factors such as IFIs and MNCs, my focus will be on one of the interesting factor (IFIs).

3.4.1 International Financial Institution (IFI)

The very idea behind the formation of the International Financial Institutions after the post-cold war is to provide financial relieve through loans to its members, in the form of a state. Organisation like commercial banks and international organisation such as IMF whose main service is to provide credit internationally are defined as IFIs. I will be analysing IMF as part of the IFIs due to it leading role in the underdeveloped countries as a supranational body for development.

3.5 Conceptual Framework

Supranational bodies like IFIs and others factors have come to play a centre role in the economic development of Nigeria. The impact of globalisation can be seen on theses countries by analysing IMF as supranational body of the IFIs because they have become the main instrument for the implementation of the neo-liberal agenda.

The economic development of the underdeveloped countries can not be analyse properly without the application of the two economic theories mention and defined in the literature review:

Dependency Economic theory and,

Liberal Economic theory

The historical background and the suitable definition of economic development have been stated in the literature to show the connection of the three economic variables:

Structural Change

External influence on Government and,

Environmental Conditions.

These three variables are the element of economic development. IMF impact on these three variables will be analysed separately in order to measure their impact on economic development. When the economic development is positive then the three variable combined is positive.

The entire three variables are dependent on each other. Any change in one leads to the change in the others because no economic variable is analysed independently.

4. EMPIRICAL DATA

4.1 Background on Nigeria

Nigeria with Area: 923.8 thousand sq. km. (356,700 sq. mi.) about the size of California, Nevada, and Arizona, is located on the Gulf of Guinea on the west side of the Africa continent. It has a population of about 150 million, it's the most populous country in Africa and the continent's leading oil producer. A former British colony, the country gains its independence in 1960. Abuja is the new capital city replacing Lagos as the former capital city in December 1991(Metz 1991). Since from 1960 to 1999 the country has been lurching from one military coup to another, which was all followed by seven bloody coups and three ended in assassination. In October 1995, the process of handing over power to civilian government was initiated and it finally came to be in 1999 when the military government handed over power to a democratically elected government.

Till now, the country is under civil governance but it faces the growing challenge of preventing Africa's most populous and second largest economy after south Africa from breaking apart. Although Nigeria is considered a developing country, it's GDP as for 2008 is estimated at$183 billion (agriculture 33%; industry 39%; services 28%). Real GDP growth rate (2009): 4.4%.

Oil growth: -18%. Non-oil growth: 3%.

Per capita GDP (2009): $1,418.

Inflation (2009): 11.5%.

Foreign direct investment (FDI, 2008): 29.5% of GDP

Currency: Naira (150 Naira = U.S. $1 as of March 23, 2010).

(May 12, 2010, Bureau of African Affairs)

4.1.1 Economic History of Nigeria

International trade have been affecting Nigeria economic development dating as far back as 1000 AD. This started when the major kingdoms and empires initiated a terminal of north - south trade between north African barbers and forest people who exchange slaves, ivory, and kola nuts for salt, glass beads, corals, cloths, weapons, brass rods, and cowry shells used as currency. Among these trades only the slave trade boosts the economic of Nigeria, even though it's considered immoral. The European established coastal ports in the 17th through 19th centuries for the increased on traffic of slaves destined for the Americas. With the slave trade declare illegal, Nigeria turn to commodity trade, especially in palm oil and timber, to replace the slave trade, particularly under the anti-slavery action by the British Navy.

The British expanded trade with the Nigeria interior to the Napoleonic wars. About 1885, the British claimed a sphere of influence in the western part of Nigeria which received international recognition. By 1900 the territory came under the control of the British government, which immediately consolidates its hold over the area of modern Nigeria. In 1914, the area was formally united as the "colony and Protectorate of Nigeria".

As for all colonies in Africa, Nigeria started to supply (export) the British with raw materials (primary goods) on a very low tariff while the final manufactured goods (secondary goods) are import back to Nigeria on a very high tariff. There was a growth in the structure of economy which helped make Nigeria a net exporter which gave the domestic manufacturers a chance to dominant a position over the imported product. Although almost 80% of the country's population depending on the agricultural sector can earn just enough to survive; globalisation of industry was considered a positive impact to Nigerians by the British (Ekundare, 1976).

The British administered northern and southern Nigeria separately; the northern region retained their religion - based administrative structures under an "indirect rule" arrangement with the colonial authorities. While it administered direct rule in the west, and south; therefore the influence on education system by the British was established more strongly in the south and west than in the north, with the social, cultural, and political consequences still evident today.

The economist created the international economic order after the war world II in order to avoid the occurrence of the "beg- thy- neighbour" policy which caused the great depression in the 1930s (ITO, 241). With the war world II over, the demanded for independence by Nigerians resulted in successive constitutions legislated by the British Government - moving Nigeria toward a representative self-government. With the discovery of oil one will assume that with a stabilized economic and political policies Nigeria should be stepping into its independence with the hope of soon become a country of major wealth.

4.2 IMF Background

The International Monetary Fund (IMF) was established from 1st -22nd July 1944 by 44 countries signing the Article of Agreement in Breton Wood at the United Nation Monetary and Financial Conference, New Hampshire. At 27th December 1945 the Article of Agreement enter into force after ratification by twenty -nine countries and by 8th -18th March 1946; the organisation held its first ever meeting in Savannah, Georgia to adopt bylaws and elect its first executive directors. The fund's headquarters location was decided upon by governors to be Washington D.C and by 6th May 1946 the twelve executives held their first meeting in Washington D.C.

At 1st March 1947 operation finally began with the purpose of maintaining on a framework of exchange rate for international free trade. With the world shifted away from the gold standard in the 1970s which caused the fixed exchange rate system collapsed, IMF faced crisis of purpose. Because of this, IMF then gradually transformed from a currency regulating institution to a policymaking strategic institution to incorporate poverty reduction policies as well as creating economic stability (BBC, 2008), (de Vries 1986:14).

The creation of the LDCs made IMF's to focus on financial assistance to these underdeveloped countries which are termed "disadvantage in their development". However, this financial assistance comes with a weight load of conditions which are imposed on the recipient government and these loans are usually provided in foreign currency.

Since the 1970s, the IMF has rapidly transformed and today it engages in establishing macroeconomics policies to poorest regions of the world. Unfortunately, It's became preoccupy with the power to dictate broad programs to sovereign nations. By the year 2000, about sixty countries participated in IMF programs with the intention of poverty eradication, promotion of international financial stability and national prosperity. However, the financial instability of East Asian (1997-8), spreading to Thailand, Korea, and Japan, followed by Russia and Brazil where million of lives were affected and the economic turmoil threaten the rest of the world, brought strict and closed scrutiny on the accountability and transparency of IMF operations.

One out of the numerous central problems of the IMF operations is the marginalisation of the underdeveloped nations represented in the administrational level. In other words, the ability of these underdeveloped nations to participate in the policy making is impossibly obstructed, and therefore, priorities of the IMF do not necessarily reflect the view of these underdeveloped nations. This means that the developed countries can basically dominant board decisions making it impossible for the underdeveloped nations representatives to influence the board agenda on their priorities. (Carin and Wood, 2005)


To export a reference to this article please select a referencing stye below:

Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.

Request Removal

If you are the original writer of this essay and no longer wish to have the essay published on the UK Essays website then please click on the link below to request removal:


More from UK Essays

We can help with your essay
Find out more