Can a Nigerian squeeze the poor for the World Bank?

19 April 2012 by Patrick Bond

In coming days, the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

will have a new president. Smart money backs Barack Obama’s choice: Dartmouth College president Jim Yong Kim.

But two weeks ago, Nigerian Finance Minister Ngozi Okonjo-Iweala was endorsed by her Pretoria counterpart, Pravin Gordhan. South Africa’s nomination, alongside Angola and Nigeria, dashed the dream that the BRICS bloc of rising subimperialist powers would choose a unifying candidate: the same day, Brazil nominated a Latin American.

It is most tempting to support any African challenge to Washington – especially by a strong woman – given how much damage (half-Kenyan) Obama is doing to the continent by pampering its dictators, reducing medical aid, introducing the Pentagon’s Africacom military command, extracting oil and causing climate change.

But The Economist, New York Times, Financial Times and dozens of former World Bank executives support Okonjo-Iweala because, according to Foreign Policy journal, she is “fairly orthodox, free market.” That ideology she learned at Harvard University’s notoriously inept economics department (profiled in the film Inside Job) where she graduated summa cum laude.

Returning home, recalls Nigerian Guardian columnist Sonala Olumhense, “She was one of those who put together the National Economic Empowerment and Development Strategy (NEEDS), which, we were assured, would cure employment in Nigeria before our very eyes.”

It was, says Olumhense, “the original 419 [Nigerian financial scam]. In just months, NEEDS slipped into folklore; nobody from that team has acknowledged its existence since then, let alone taken responsibility for its deception.”

(Shades of South Africa’s 1996-2001 GEAR policy. Introduced by Thabo Mbeki with the battlecry, ‘Just call me a Thatcherite!,’ it failed to meet every one of its targets aside from budget cuts and lowered inflation Inflation The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down. .)

The same dynamics worked in relation to foreign debt. In 2005, Nigeria’s rowdy parliament regularly rejected loan repayments as undemocratic and corrupt, given the country’s desperate poverty and the debts’ origins in the country’s military dictatorships.

“General Abacha looted about $3-5 billion from the Nigerian treasury,” remarked Okonjo-Iweala in a 2007 speech,“in truckloads of cash in foreign currencies, in traveler’s checks and other means. Most of these monies were laundered abroad through a complex network including some of the world’s best known banks.”

Given the Nigerian debt’s odious origins and that vast sums were never returned to Nigeria after Abacha’s death (corrupt Swiss banks only grudgingly repaid $700 million, years after being asked), should repayment demands by these financiers – including the World Bank – have been honoured?

To the delight of the West’s debt-collection mafia known as the Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.

, in October 2005 Okonjo-Iweala agreed to immediately repay $12.4 billion so as to reduce the outstanding debt from $35 billion to $5 billion.

The Global AIDS Alliance was outraged by that vast lump sum squeezed from Nigeria’s poor: “Creditors should be ashamed of themselves if they simply take this money. These creditors often knew that the money would be siphoned off by dictators and deposited in western banks, and the resulting debt is morally illegitimate.”

According to the leader of Nigeria’s Jubilee debt-cancellation network, Rev David Ugolor, “The Paris Club cannot expect Nigeria, freed from over 30 years of military rule, to muster $12.4 billion to pay off interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. and penalties incurred by the military. It is scandalous.”

A year later, a classified US State Department cable (released in 2011 by WikiLeaks) about Nigerian corruption reported that amongst President Olusegun Obasanjo’s “inner circle,” Okonjo-Iweala reaped “hefty rewards with impunity,” specifically steering public contracts to her brother, a charge she has denied, although both sit on the board of the mysterious $50 million Makeda Fund.

After serving as deputy to Bank President Robert Zoellick from 2007-11, Okonjo-Iweala returned to her old job in Abuja. To start off 2012, she doubled the fuel price overnight by removing subsidies, on the instruction of IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
Managing Director Christine Lagarde, who is herself under investigation for facilitating French political corruption.

The result was unprecedented civil society organising and non-violent protest. Nigerian police responded by murdering several unarmed demonstrators. Prior to desperate state concessions and trade union capitulation, ‘Occupy Nigeria’ very nearly toppled the Goodluck Jonathan regime in the style of Tahrir Square.

As a result, Okonjo-Iweala’s case for a promotion is made by the writer Ikhide Ikhelo: “There is no one else better primed to execute the obnoxious policies of the World Bank against African and brown nations. Her current tour of duty, although disastrous to Nigeria and her poor, has given her an impeccable resume to spread the Bank’s gospel of uncritical capitalism and indifference to the world’s poor and dispossessed.”

Concludes Ikheala, “the most compelling reason why she deserves the World Bank presidency: Nigerians need a break.”

Source: The Mercury, 10 April 2012

Patrick Bond

is professor at the University of Johannesburg Department of Sociology, and co-editor of BRICS and Resistance in Africa (published by Zed Books, 2019).



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