ABSTRACT Recently, the International Monetary Fund called on Nigeria to devalue its currency in order to save its foreign

reserve. This has generated a great deal of mixed reactions among financial experts. This report examines the structure of the Nigerian economy and the likely impact of the Funds advice on the economy with special emphasis on the manufacturing sector. The paper further reviews the effects of past recommendation on economic policies by International Monetary Fund to developing countries, highlighting most especially, the effects on the economy of structural adjustment programme (SAP) foisted on Nigerian economy at the instance of IMF in 1986. The paper concludes that the recent call was ill conceived and will do more harm than good to the manufacturing sector and indeed the Nigerian economy as a whole.

INTRODUCTION Over the past two decades, the International Monetary Fund and World Bank have consistently undermined the economies of the developing countries especially in Africa through the policies they have forced on African governments. The continued reliance of poor and highly indebted countries of Africa on loans from these institutions has given these bodies the leverage to control and direct the economic and financial policy- making in African countries. The economic policies imposed by these institutions have forced African governments to structure their economic policies towards greater integration in the international markets at the expense of social and infrastructural services and long-term development priorities. The IMF and the World Bank were the forces behind western power during the cold war in both economic and political terms. They perform political function by enforcing geostrategic interests at the expense of development objectives and also promote economic agenda that attempt to preserve western dominance in the global economy. In a recent development, the international monetary fund called on Nigerian to devalue its currency to save its foreign reserves. Reporting on the state of the

Nigerian economy, the IMF stated that the naira was overvalued and that more exchange rate flexibility was required to prevent the Central Bank of Nigeria from running the down the foreign exchange reserve to fix the rate. It further added that greater exchange rate flexibility would stop one-way bets in the foreign exchange market and cushion external shock. The thrust of this call has become a source of concern to many Nigerians.
ANALYSIS OF THE NIGERIAN ECONOMY

Nigeria has huge economic potential. It has an energetic private sector, talented and well educated entrepreneurs, a skilled labour force, vast and fertile agricultural land, and enormous domestic market of over 120 million people. Nigeria is the seventh-largest exporter of oil globally and is also richly endowed with other natural resources. Despite its great potential, Nigeria social and economic development remains far below the minimum expected of the population. Nigeria has consistently remained a mono export economy, depending solely on revenue from oil exportation for its survival while importing almost every other product from consumer to industrial goods. In other words, Nigeria despite its abundant natural and human resources is primarily an import dependent economy with economic performance consistently falling below expectation.

The current economic position has been due largely to frequent changes and somersault of government, and its policies and poor economic policy implementation that led to slow output growth. Steady decline in the standard of living, increased income inequality and poverty. Specifically, economic growth and development has been inhibited by the neglect of the non-oil export sector.
A REVIEW OF PAST INTERNATIONAL MONETARY FUNDS ECONOMIC POLICIES MANDATES/RECOMMENDATIONS AND THEIR IMPACT ON NIGERIAN ECONOMY.

In order to make a well-informed analysis of the Funds advice, it is necessary to review past recommendations by International Monetary Fund to Nigeria and how such recommendations with particular reference to structural adjustment programme (SAP) have impacted on the economy. In 1986, the international Monetary Fund foisted on Nigerian, the structural adjustment programme (SAP). SAP was recommended to Ibrahim Babaginda administration as a panacea for economic growth and development. The recommendation rather that foster growth as projected by IMF put the naira on a free fall which unavoidably ushered the economy into serious jeopardy. Some of the outcomes included sky rocketed inflation, impoverishment of Nigerians, insecurity and unemployment. The untold hardship that resulted from implementing this recommendation is still biting hard, over two decades on. The International Monetary Fund has over the years made economic and financial recommendations to various developing nations which in

most cases ended up exacerbating the economic problems that they were purported to solve, the simple reason being that IMF most often do not know enough about the specifics of the countries. Numerous failure of the last two decades based on the implementation of IMF recommendations especially in Africa, Asia, Russia and Brazil- have demonstrated succinctly that IMF do not know what is best , even if they were to have the best of intentions.
EXPECTED EFFECTS OF THE IMF RECOMMENDATION/ADVICE ON THE MANUCTURING SECTOR AND ECONOMY

In terms of economic principle, it could be argued that devaluation would make our exports cheaper and hence competitive on the global markets, at same time making our imports more expensive relative to domestically manufactured goods, as more naira will be required to purchase the same amount of foreign currency (dollar). This is expected to discourage imports while stimulating exports. In theory, our import would decline (reason preference to cheaper domestically made goods) and our exports would rise by reason of our exports becoming cheaper in the foreign markets, reducing/eliminating (in theory) our trade deficit. Sound economic theory and possibly would be effective in an economy that is less dependent on imports for domestic consumptions, with a well-developed manufacturing sector.

Following the above analysis, the question is what is the percentage of our export in relation to our import? As a nation that is primarily import dependent, devaluation would only generate hyper economic inflation. Further, Nigeria is a mono export economy, with oil-its main export accounting for an overwhelming 95% of Nigerian exports. Crude oil as a product does not respond perfectly to the actions of a single manufacturer/supplier in the market. Even as an OPEC member, Nigeria has little control over the revenue it can generate from selling its own oil production. It is obvious from the above stand points that domestic manufacturing industries will be confronted with inflation as they try to import goods needed to continue operation. As the costs of these imported goods rise, manufacturers will face the challenge of keeping their own prices down. Even with their competitors prices forced upwards; although, local manufacturers can expect having challenges competing as the local industries are simply not developed sufficiently to compete. Otherwise, how else can one justify the fact that over 90% percent of the manufactured goods that the nation consumes are imported? From the Nigerian peoples perspective, the prices for all these goods will more than double. Most manufacturers by reason of their inability to compete will be forced to shut down operation which will generate further unemployment compounding the crisis of the already depressed economy.

Another adverse likely impact of the recommendation is that for manufacturers that have credit facilities denominated in foreign currencies, will upon the implementation of the policy require more naira to service their debts as well as repayment of the loans thereby increasing the costs of doing business in Nigeria. It is also vital to mention at this point that devaluation of naira can be expected to create adverse consequences for entities outside Nigeria- Foreign investors caught holding Nigerian currency likewise will panic over the pain of the adjustment. Companies that maintain large operations in Nigeria, and possess large amounts of Nigerian bonds and other investments, stand to suffer devastating losses as the value of bonds and investments denominated in naira fall significantly because of devaluation. CONCLUSION The term ceteris paribus as commonly used among economic scholars when propounding economic theories and principles is in recognition of the fact that in practice, all things are never equal. It is my opinion that economic policies and recommendations should not be based exclusively on economic theories and principles, as specific and instrumental frameworks necessary to support these theories vary from one country to another. An economic recommendation that is effective in one country may not work in another and also within same country an economic policy that is effective at one point may prove ineffective at other

point(s). At this point, Nigeria has no reason devaluing its currency because nonoil export is still very insignificant while imports are both refined petroleum products and all kinds of non-oil products. Improving local productive capacities is more useful at this point than academic devaluation as recommended by IMF. Therefore, like the Central Bank of Nigeria and other analysts, I also disagree with International Monetary Funds position on the ground that devaluation will lead to a decline in the purchasing power of the countrys currency which would only help to hasten the collapse and eventual demise of the domestic industries.

REFERENCES Ann-Louise Colgan, Hazardous to Health: The World Bank and IMF in Africa, Africa Action, April 18, 2002 Retrieved from: http://www.globalissues.org/article/3/structural-adjustment-a-major-cause-ofpoverty#IMFandWorldBankAdmitSomeofTheirPoliciesDoNotWork

Odidison Omankhanlen, Adekunle Tayo, Dele Aderibigbe, Ayomide Owonibi and Lanre Oyetade, Mixed reactions greet IMFs call for naira devaluation, Monday, Nigerian Tribune, 21 February 2011. Retrieved from: http://tribune.com.ng/index.php/front-page-news/17836-mixedreactions-greet-imfs-call-for-naira-devaluation

IMF, MEMORANDUM ON Economic and Financial Policies of the Federal Government of Nigeria for 1999, February 22 1999. Retrieved from: http://www.imf.org/external/np/loi/1999/022299.htm

Sun News Publishing, IMF and the value of the Naira, Thursday, March 10, 2011.Retrieved from: http://www.sunnewsonline.com/webpages/opinion/editorial/2011/mar/10/edito rial-10-03-2011-001.htm Matthew Lackey, Venezuela's gamble with currency devaluation, Monday, February 01, 2010. Retrieved from: http://www.speroforum.com/a/26541/Venezuelas-gamble-with-currencydevaluation

Mark Weisbrot, Globalization: A Priemer, October 1999