INTERNATIONAL POLITICS

WHEN THE NEW WORLD BANK PRESIDENT IS ANNOUNCED TODAY…

In a matter of hours from now, the next Chief Executive of the World Bank will be announced, as the current President, Robert Zoellick bows out on June 30. The last few weeks have however offered  journalists, politicians, economists, development experts and indeed the global community opportunities for expression, demonstration and analysis of interests, opinions and expectations as to who becomes the next chief tenant of the Bretton Woods’ institution for another five years. Some of these interests, opinions and expectations are coloured in different shades for different persons and groups.

For all, the motivation behind election or selection (whichever we eventually have) of the next President of the World Bank should be the obvious need to advance global development and institutional strengthening. In effect, the overriding interest must be the common good of mankind regardless of race, state and personal affiliations of the candidate. For the President of the United States and his “anointed one” Jim Yong Kim, an accomplished Public Health expert, the race to the Bretton Woods may be a move in proving to the Republicans that he (Obama) is still in charge of the interests of US and the American people and so deserves to retain the leadership of the White House for another four years, especially, as the US Presidential election draws nearer.

For the African community and its few allies, it appears that their support for the economic czar and the Harvard and MIT-trained Nigeria’s finance Minister, Ngozi Okonjo-Iweala, is the emotional feeling against “America’s monopoly” of the World Bank’s leadership since inception. The candidates on their own have come under the spotlight of analysts since expression of their interests for the race.  The two candidates appear to parade excellent credentials as development experts. While Kim has records of remarkable Public Health development of the global community, Iweala is a versed and well experienced economic expert with verifiable results. Though some of the supporters of the Nigeria’s finance minister have emotionally argued since Kim is only Public Health expert and not an economist or banker, he is less qualified to Iweala who is armed with a PhD in Regional Economic Development from MIT. Contrary to this opinion, you do not need to be an economist to lead institutions like the World Bank or the IMF. Christine Lagarde, the current Managing Director of the IMF is a lawyer and a significant number of past Presidents of the World Bank were also lawyers with financial sector experience. So, experience and competence should rather be the parameters for qualification into this office and not certificates or sentiments. This is the ideal!

However, in the face of the ideal, what appears real is that whoever will emerge amongst these two candidates will do so on the strengths of its supporters or sponsors. It is obvious that the respective weights being thrown behind these candidates by their sponsors are one hand “HEAVY WEIGHT” and on the other “Light Weight” US whose candidate is Kim, has the largest voting power which is 15.85% of the voting powers, while EU has 29.2% and it is believed that US already has the support of EU for often supporting the EU for producing the IMF’s Managing Director. United States is also believed to have earned the support of some other countries like Japan which 6.84% is more than the entire Africa’s voting power of 5%. This analysis may just quickly help call to mind the saying that in a democracy, “Minority will have their say, but majority will have their way” Going by the analysis of the voting rights of the state-members of the World Bank, if Kim is eventually announced today as the next President of the World Bank, definitely the critical minds will not be caught by surprise. But what about the America’s commitments to ensure an open and election based on merit? Sure we all know that such statement was ordinarily expected as one of the clichés in a democratic society. 

But when (or should I have said “If”) Kim is finally announced as the next President of the World Bank, more than any other thing, America’s reactions and statements of its leaders, including any speech by President Obama may paint the country’s diplomacy in a particular light and evidently show its respect for merit and competence against the parameter of its confessions.

NIGERIA in the EYES of the IMF

On February 22, 2012, the Executive Board of the International Monetary Fund (IMF) concluded the 2011 Article IV consultation with Nigeria.1 Background Economic growth remains strong in Nigeria, with non-oil real gross domestic product (GDP) estimated to have grown at 8.3 percent in 2011 and overall real GDP at about 6.7 percent. Inflation slightly declined to 10.3 percent in December 2011 (year-on-year) from 11.7 percent a year earlier, in response to monetary tightening by the Central Bank of Nigeria (CBN) and moderation of food prices. A modest fiscal consolidation took place in 2011. The non-oil primary deficit (NOPD) of the consolidated government is estimated to have narrowed slightly from about 34.6 percent of non-oil GDP in 2010 to 32.9 percent in 2011, mainly due to expenditure restraint at the federal government level. Higher oil prices helped shrink the overall fiscal deficit from 7.7 percent of GDP in 2010 to about 0.2 percent of GDP in 2011. Monetary policy was tightened substantially in 2011 in response to high inflation and strong foreign exchange demand. The central bank has gradually increased its overnight deposit rate by 900 basis points since September 2010 and tightened regulatory requirements. In November, it adjusted downward its soft band around the naira-US dollar exchange rate, and depreciation pressures on the naira have since abated. Financial soundness indicators point to continued improvements in the health of the banking system. Growth is projected to remain robust in 2012 and inflation is projected to increase temporarily as a result of the increase in gasoline prices. The main downside risks to the short-term outlook are a further deterioration in the global environment and an exacerbation of current violence in northern Nigeria. Executive Board Assessment Executive Directors commended the authorities for countercyclical policies that have supported economic activity in challenging circumstances. Directors considered that the medium-term growth outlook remains favorable, although subject to external downside risks. Accordingly, they emphasized the continued need for policies to safeguard macroeconomic stability, diversify the economy, and make growth more inclusive. Directors supported the authorities’ strategy to rebuild fiscal buffers through a better prioritization of public expenditure, continued subsidy reform, and improved tax administration. Efforts in these areas will also provide the necessary resources for targeted social programs and needed infrastructure. Directors endorsed the use of conservative oil price assumptions in the preparation of the budget but noted that only a comprehensive tax reform will reduce the budget’s dependence on oil revenues over the medium term. Directors highlighted the importance of improving public financial management, including a stronger framework for managing Nigeria’s oil wealth. They welcomed the establishment of a Sovereign Wealth Fund (SWF) and underscored that a rules-based approach to setting the budget reference oil price would strengthen the budgetary process and the operations of the SWF. In this regard, Directors recommended that outlays from the SWF’s infrastructure fund be integrated into the budget and medium-term expenditure plans. Directors noted the monetary authorities’ commitment to further reduce inflation but considered that a pause in the tightening cycle is at present warranted. More broadly, they agreed that a monetary framework better focused on a clear inflation objective should help anchor inflation expectations and support disinflation. Greater exchange rate flexibility will also facilitate the pursuit of price stability. Directors commended the authorities for their actions to resolve the recent banking crisis. The modalities of operation of the asset management corporation should continue to make sure that fiscal risks and moral hazard are minimized. Directors supported the central bank’s focus on strengthening supervision and the regulatory framework, including by addressing remaining deficiencies in the Anti-Money Laundering/Combating the Financing of Terrorism regime. They also agreed that a Financial Sector Assessment Program update will help take stock of the progress so far and provide a road map for remaining reforms in the financial sector. Directors concurred that wide-ranging reforms are needed to make growth more inclusive. They welcomed the authorities’ initiatives to improve the business climate and reform sectors with high employment potential, particularly agriculture. Directors encouraged the authorities to persevere with planned reforms in the energy sector under appropriate social safeguards.

Nigeria: Selected Economic and Financial Indicators, 2007–12 2007 2008 2009 2010 2011 2012 Act. Act. Act. Act. Est. Proj. National income and prices (Percentage change, unless otherwise specified) Real GDP (at 1990 factor cost) 6.4 6.0 7.0 7.8 6.7 6.9 Oil and Gas GDP -4.5 -6.2 0.5 5.0 -2.2 1.9 Non-oil GDP 9.5 9.0 8.3 8.4 8.3 7.8 Production of crude oil (million barrels per day) 2.22 2.09 2.16 2.46 2.44 2.48 Nominal GDP at market prices (trillions of naira) 20.9 24.6 25.1 29.6 36.3 40.7 Nominal non-oil GDP at factor cost (trillions of naira) 13.1 15.2 17.4 19.5 22.5 26.6 Nominal GDP per capita (US$) 1,153 1,401 1,110 1,261 1,479 1,545 Consumer price index (end of period) 6.6 15.1 13.9 11.7 10.3 11.0 Current account balance (percent of GDP) 1 16.8 13.6 7.9 1.3 6.9 6.4 Consolidated government operations (percent of GDP) Total revenues and grants 26.9 32.0 17.8 23.3 28.2 27.3 Of which: oil and gas revenue 20.4 25.8 10.6 16.3 21.6 20.0 Total expenditure and net lending 25.3 25.7 27.2 31.0 28.4 27.0 Overall balance 1.6 6.3 -9.4 -7.7 -0.2 0.3 Non-oil primary balance (percent of non-oil GDP) -28.2 -29.9 -27.2 -34.6 -32.9 -27.9 Excess Crude Account / SWF (US$ billions) 2 14.2 19.7 7.1 2.7 4.7 14.8 Money and credit (Change in percent of broad money at the beginning of the period, unless otherwise specified) Broad money 44.2 57.8 17.5 7.0 9.8 18.6 Net foreign assets 23.5 23.3 -10.9 -10.3 7.0 12.0 Net domestic assets 20.8 34.5 28.4 17.4 2.8 6.6 Treasury bill rate (percent; end of period) 7.8 5.6 4.0 7.5 15.1 ... External sector (Percentage change, unless otherwise specified) Exports of goods and services 13.9 30.1 -33.4 31.2 26.9 3.4 Imports of goods and services 29.8 37.4 -22.6 52.7 5.9 8.0 Terms of trade 1.4 11.8 -17.2 10.6 9.5 -2.2 Price of Nigerian oil (US$ per barrel) 71.1 97.0 61.8 79.0 109.2 103.7 Nominal effective exchange rate (end of period) 100.3 101.6 82.2 83.6 81.7 ... Real effective exchange rate (end of period) 108.5 122.9 109.9 120.7 128.8 … Gross international reserves (US$ billions) 3 51.3 53.0 42.4 32.3 32.9 39.2 (equivalent months of imports of goods and services) 9.5 12.7 6.7 4.8 4.5 5.1 Sources: Nigerian authorities and IMF staffs’ estimates and projections. 1Large errors and omissions in the balance of payments suggest that the current account surplus is overestimated by a significant (but unknown) amount. 2Includes all components of the sovereign wealth fund (SWF). 3Includes $2.6 billion in 2009 on account of the SDR allocation. From 2012 onward, it reflects accumulation in the stabilization component of the SWF. 1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.