World Bank reforms and Nigeria

Muhtar, Nigeria’s current Minister of Finance, is the first African to hold the exalted position in the 65-year history of the Bretton Woods institutions. The IMF and the World Bank were established in a small village, known as Bretton Woods, New Hampshire, U.S.A, in July 1944. The birthplace of the two institutions instantly became famous; […]

Muhtar, Nigeria’s current Minister of Finance, is the first African to hold the exalted position in the 65-year history of the Bretton Woods institutions.

The IMF and the World Bank were established in a small village, known as Bretton Woods, New Hampshire, U.S.A, in July 1944.

The birthplace of the two institutions instantly became famous; they are now jointly called the Bretton Woods Institutions.

At the Bretton Woods, the 44 initial member countries assigned to the World Bank the primary responsibility of financing economic development, as captured in its formal name — the International Bank for Reconstruction and Development (IBRD).

For the IMF, its sole responsibility is to oversee its members’ monetary and exchange rate policies and be guardian of the code of conduct.

Philosophically, the IMF is committed to the orderly and stable growth of the world economy by receiving frequent reports on members’ economic policies and prospects.

These it debates, comments on, and communicates to the entire membership, so that they may respond in full knowledge of the facts and a clear understanding of how their own domestic policies may affect other countries.

The minister’s selection makes him the third Nigerian to hold a key position in these institutions that have, overtime, influenced and shaped the global economic structure.

Before Muhtar’s selection, two former Nigerian Ministers, Dr Ngozi Okonjo-Iweala and Dr Obiageli Ezekwesili, were appointed as the World Bank’s Managing Director and Vice President, African Region, respectively.

Okonjo-Iweala served as Minister of Finance and Minister of Foreign Affairs between 2003 and 2006, while Ezekwesili served as a Minister of Solid Minerals and Minister of Education at about the same period.

Muhtar’s selection was the highpoint of the 2009 IMF/World Bank Annual meetings, which held in Istanbul, Turkey, in October.

“It is a great honour for Nigeria to accept the Chairmanship of the Board of Governors for 2010,” he said.

More than the honour to Nigeria, Muhtar’s selection signaled a new direction in the relationship between African countries and the two institutions.

In terms of the board’s responsibility, the IMF and World Bank Board of Governors ratify the decisions put forward by the 24 Executive Directors of the World Bank and the IMF.

The Executive Directors of the bank run the day-to-day activities of the two multilateral institutions.

The IMF and World Bank have 186 member countries. The countries are represented by a governor on the board.

The governors are either Ministers of Finance or Central Bank Governors from the member countries and they are responsible for the policy direction of the Bretton Wood Institutions.  

Muhtar was presented to the Board of Governors by the Minister of Finance of Liberia, Augustine Ngafuan; he took over from Dr Nguyen Van Giau — the Central Bank Governor of Vietnam.

Accepting the selecting, he said the meetings of the IMF and the World Bank had been driven by the shared conviction that the “unprecedented global challenges facing the world, must be matched by unprecedented global solutions.

“We recalled that, as the financial crisis led to the worst global recession in three quarters of a century, affecting people in every country, the Bretton Woods Institutions were called upon to lead a strong collaborative response.

“We commended the Funds leadership of the coordinated policy actions and the provision of rapid, large scale and flexible financing to countries in all regions, including the overhauling of its lending and conditionality framework.

“We also recognised the Bank’s leadership in addressing the human crisis that has resulted from the financial and economic crisis, through continued measures to tackle poverty via projects focused on social protection, long-term infrastructure investment and private-sector-led economic growth, ‘’ he said.

The Minister said the Funds and the Bank must continue with their national and multilateral partners to reform the international financial system, and to further strengthen their surveillance of the world economy.

Back home and outlining his priority for Africa, Muhtar said his selection signaled renewed confidence by the Funds and the Economic Community in Nigeria’s economic policy direction.

“As the presiding officer of the meetings, I intend to use this position to highlight and bring to the fore problems of sub-Sahara Africa in particular and developing countries in general.

“While all the issues cannot be resolved during my tenure as the chairman of the Joint Board of Governors, I would do my best to refocus the two institutions to ensure that they adhere to their original goals of promoting economic development and poverty reduction,” he said.

The tone of Muhtar’s selection and the gradual appearance of more Africans at the helm of affairs of the World Bank, was set by it’s President, Robert Zoellick.

Zoellick, appointed in July 1, 2007 to head the Bank, had made it a priority to give more voice to the developing countries, especially in running the affairs of the multilateral institutions.

At the World Bank High Forum meeting in Accra in 2008, the annual Spring Meetings in Washington DC in April, the G24 meetings in September, 2009 and the 2009 IMF/World Bank annual meetings in Turkey, Zoellick said there was a need for more voice for the developing countries.

He said developing countries, especially Africa, should have more representations in the G-20 and in the international multilateral institutions.

According to him, the push to increase the developing countries’ representation by 3 per cent in the IMF/World Bank voting right, bringing their vote to 47 percent, should be moved to 50 per cent.  

“If developing countries are part of the solution, they must also be part of the conversation.

“The international system needs a World Bank Group that represents the international economic realities of the 21st Century, recognizes the role and responsibility of growing stakeholders, and provides a larger voice for Africa,” Zoellick said.   

While Zoellick said a 47 per cent vote for developing countries was not enough, Ezekwesili said the reforms had so far favoured Africa, especially, with the allocation of a third constituency to the continent last year.

Ezekwesili said the third chair that was allocated to Africa was headway to a stronger participation in the affairs of the global institutions.

“With an additional chair for Africa, meaning that there are more African chairs on a board of 24 chairs. That is a significant increase for Africa; its voice and participation is getting there gradually.

“I think that in a lot of ways, as African countries grow their economy and many of them take charge of their sources of potential economic growth and become buoyant, they become very significant as they join the class of emerging economies.

“Which also will increase the level of confidence they have to be part of the global financial system,” she said.

Ezekwesili said the African countries had decided that the sharing of the chair among the constituencies would be made known in 2010.

In putting Africa on the spotlight, the World Bank Board of Governors had, in 2008, elected Youssef Boutros-Ghali as the chair of the IMF’s policy-setting committee.

Boutros –Ghali beat India’s Finance Minister Palaniappan Chidambaram to chair the 24-member International Monetary and Financial Committee (IMFC).

To further give bite to Africa, the Board of Governors also selected an African country, Egypt, to host the 2012 IMF/World Bank annual meetings, which pulls together about 13,000 participants, including top world leaders.

The meeting holds twice in Washington DC and moves to another country after three years.

So far, the World Bank’s commitment of 3.7 billion U S dollars in Nigeria, spreads across 32 projects and operations in the areas of agriculture, energy, transport, industry and urban and community development.

The Bank, according to the International Economic Relations department of the Ministry of Finance, has the highest financial commitment in projects across the country, among the multilateral institutions.  

The Bank had extended its interest to environment, education, health, capacity building in governance, communication, programme lending, water, sanitation and policy loans.

Joseph Stiglitz, a former Vice president of the World Bank and the Bank’s critic, said there was a need for greater representation of Africa in some groupings like the G-20, noting that the entire membership “controls over 80 per cent of the world’s GDP.

“But the whole of sub-Sahara Africa has to be represented by South Africa, ‘’ he said.

As a Nigerian sits on the helm of affairs of the Bretton Woods Institutions, with economic forecasts looking up, it remains to be seen if 2010 would cap the promises of 2009 for equal voice and representation in the global institutions. (NANFeatures)