Devaluation: Good For Nigeria & Ghana But Not China & Japan
There is a selfish interest and glaring double standard behind International Monetary Fund and World Bank shareholders’ demand for devaluation of currencies in developing countries like Nigeria, Ghana, Congo or Tanzania but crying foul when China and Japan devalue their money. It is about African RAW natural resources like gold, diamond, cocoa, cola; Uranium and Cobalt and MAN-MADE products like automobiles, iPhones, planes, recorders, TVs, or nuclear powers.
China and Japan are competitors in man-made goods with America and Europe. Devaluation in China and Japan makes their man-made materials cheaper in the world markets. However, our African natural resources have no market except those wanted by buyers as raw material. What they want devaluated, in the first place, were cheaper prices for raw gold, diamond, cassava, oil, kola or cocoa. Buyers call prices by erratic whims or caprice. Discouraged our Finished Products!
Devaluation by any label: it was SAP! The cheaper they buy the raw natural materials the better. We are not against anyone negotiating his best interest or getting rich. What we are against is unequal playing field where we negotiate with their cronies unduly undermining Africans with an advantage even before we take a seat. Needless to say, cronies always relent to IMF experts.
Generally, structural Adjustment Program, SAP allowed most developing countries to qualify for WB and IMF loans. But before that a setup; countries have to devalue their currencies to the dollar, do away with import and export restrictions. At the same time privatize governments’ holdings, balance their budgets and remove price controls and state subsidies. Ghana sold its Gold-Mine as the classic economic lesson of privatization. No country in the world does all that!
At some point, International Monetary Fund and World Bank showcased Ghana as model of its SAP success. There was a big debate in Nigeria as the strongman General Babangida promised he would not implement SAP as promised by General Buhari he overthrew in August 1985. Africans have never recovered from the so-called Structural Adjustment Program. It wiped out African middleclass and professionals. Salaries, savings and gratuities suddenly lost their values.
Ghana hosted the second forum of the Structural Adjustment Participatory Review Initiative (SAPRI) held in Accra in May 2001 where both IMF and WB admitted SAP failure. Their excuse was that “the World Bank failed to factor in the economic and social impact of the Bank's policies”. When African intellectuals cry that Harvard and MIT economic theories from their professors could not solve African endemic problem, their cronies dismissed it as uninformed.
They did not stop there, the working committees came up with another strategy to rectify their “mistake” called Poverty Reduction Strategy Initiative. Many of us were not fooled anyway because we told them so! They were of course right to look after their shareholders’ common interest from the countries they represented if we want to renegotiate their loans. So we went cap in hand negotiating with those that already had inside information about us at the table.
Here they come again! Nigeria has never seen its currency appreciate since the seventies. We have been going downhill since then always devaluating our currency so that they could buy all our raw cocoa and coffee cheaper. If turned into finished goods, no market for us O! Nigeria got lucky with oil and made good money. Oil was under international price dictated by OPEC cartel. We rode on that for some good times as Gowon stated our problem was how to spend money!
However, these same western countries represented in IMF, World Bank and their shareholders have been complaining bitterly about China and Japan devaluing their currencies to make their manufactured goods cheaper for export. So they want both countries to play fair. Chinese and Japanese commodities for export were out-selling the more expensive American and European manufactured products to the world market. So devaluation worked against western interest.
Unlike Africa, nationalism surged in western countries as people were asking for the boycott of Chinese material and Japanese cars. Their cheaper goods were creating jobs in China and Japan but losing jobs in America and Europe. It got worse, manufacturing moved to China because of cheap labor. Americans were told to cut wages if they want to compete. As the conservatives castrated Unions, American and European wages fell, giving birth to Trump and Sanders rallies.
Oh well, well! Japan had to do something to temper American and civilian nationalism. Toyota, Honda and Nissan went to Southern United States where labor was cheaper or where they could find non-union workers to open car-manufacturing plants. They made it difficult to tell the difference between Asian cars made in USA or Europe to those made in Asia. Asians won American and European consumers back. In Africa, the automakers only have assembly plants.
The koko of the matter is this: if devaluation is bad for China and Japan, how could it be good for African countries? In short, they have and copied manmade materials to sell that competed very well with America and Europe. Cars, iPhones, machines, parts and other gadgets can be duplicated in Asia or made cheaper whether they were superior or inferior. Asia could afford to devalue their currencies so that they could sell more of these products worldwide.
However, African countries have no home or world market for finished manmade materials to sell. Many rich Asia countries don’t even have natural resources as African countries. President Obama opened USA market by renewing AGOA for African and Caribbean countries. The laws and regulation are so stiffly enforced, Caribbean countries have problem selling their bananas!
Let’s face it heart to heart. We cannot blame only consumers that don’t like local cassava bread. Manufacturers must copy or get raw materials locally for finished products and sell them about 25% less than imported goods. If the Japanese cars can do it worldwide so can we in African countries. We have woven cotton for ages, modernize and industrialize it. Stop complaining about cheaper Chinese textiles. Americans and Europeans are not the only machine makers.
What skills do Zimbabwe farmers possess that is missing in African universities? All colleges of Agriculture must establish industrial farms. Local manufacturers must become the source of foreign income and stop depending and threatening government’s foreign reserves.