Distractions not disruptions from 2019 Nigeria Elections

Since voting for the next president is due in little more than two weeks, we will try to disentangle some of the muddled views in circulation about the impact of Nigerian elections on the economy. The consensus is that the impact is unremittingly negative, and that the investor develops a ‘wait-and-see’ stance on auto-pilot.

One theory in circulation is that the government has no time for any business other than the programme of elections. We would say that a government seeking re-election will be pushing hard on its agenda to soften up the electorate. In the current Nigerian context, this means the FGN looking to accelerate its capital releases. Voters who see a new road/school/hospital built in their neighbourhood are more likely to back the incumbent. They will also respond positively if the government, federal or state, settles arrears on salaries and pensions due to family or friends.

Another theory is that existing and potential investors succumb to a state of inertia because they are worried by the “uncertainty” surrounding the elections. The result is uncertain of course but we can say with confidence that, whatever the result, Nigeria should not fear a radical change of direction. In 2015 we had the “change” agenda, and now we have talk of floating the naira and dismembering the NNPC. Alongside their negative campaigning and finger-pointing, serious challengers everywhere look to capture the attention of voters with striking policies.

There is scope on the margins for new policies that can be introduced without the go-ahead from the National Assembly (the equivalent of President Trump’s executive orders). More broadly, the delivery of change is blunted by bureaucratic torpor across the three tiers of government. This means that we should limit our expectations of the new government in place at the end of the transition period in May. It works both way: no fear of change for the worse but equally little hope of a strong market rally like those following the election victories of Lula, now disgraced, in Brazil in 2002 and Mauricio Macri in Argentina in 2015. There were very brief, relief rallies after the Nigerian presidential elections of 2011 and 2015.

The outcome to avoid next month is a very close result that is challenged on the streets and in the courts. The presidential term is four years on the US model and the transition period three months. The time for a president and government to make their mark is already limited without such challenges.

The downside from challenges to an election result was evident in Kenya in August 2017. The Supreme Court nullified the presidential election result from earlier in the month. The main opposition candidate, who had cried foul, boycotted the re-run in October, and the incumbent (Uhuru Kenyatta) was declared winner with 98 per cent of the vote. We cannot say whether a flawed process has any impact on output beyond the very short term but we can say that the developmental capacity of the Kenyan government was weakened for about three months. The stock market saw a sell-off on the intervention of the Supreme Court and has not subsequently recovered (although other factors are also clearly at play).

According to a third theory, the macroeconomy is vulnerable to a slowdown in the run-up to the elections. Our findings suggest that this theory is the result of laziness on the part of analysts, some of whom are looking to create a narrative for their forecasts. (We were taught, in contrast, to construct forecasts on the basis of a tested narrative.) So we looked at historical data for the run-up to the Nigerian presidential elections in April 2007, April 2011 and March 2015.

The series we covered were FGN expenditure, inflation, offshore investment on the stock market and domiciliary bank accounts in Nigeria. We did not find any adverse trends other than a pick-up in in FGN spending in the run-up to the 2011 polls, which we can trace to a sizeable increase in the national minimum wage by the Jonathan administration. Eight years on, we may well be seeing a repeat (that the FGN insists is incorporated in its 2019 budget proposals).

Our findings indicate that investors could profitably move on from the ‘wait-and-see” stance. They have waited and generally seen little, if anything untoward domestically. Foreign portfolio investors have been exiting local debt markets for several months, but in response to US monetary policy normalization rather than the Nigerian elections. As ever, the domestic events to trigger their exit remain pressure on the naira exchange, public finances and official fx reserves as a result of a steep and sustained decline in oil revenue. This is not our base case expectation.

History does not always repeat itself, and it may be that the lessons we have drawn from 2007, 2011 and 2015, subject to data restrictions, no longer apply. It may also be that the next president is able to push through far-reaching change on taking office in late May. We suggest otherwise.

Gregory Kronsten

Head, Macroeconomic & Fixed Income Research

FBNQuest

By the time Atiku finishes his tenure, presidency won’t be attractive – Gbenga Daniel

THE Director-general of the Alhaji Atiku Abubabar presidential campaign, Otunba Gbenga Daniel has said that the Peoples Democratic Party, PDP candidate will appoint the Secretary to the Government of the Federation, SGF, from the South-West zone if he wins the 2019 election.

Speaking at an interactive session with reporters in Lagos, yesterday, Daniel, who also stated that Atiku would curtail tribal and religious intolerance, noted that decisions on major offices were being given “serious consideration”, adding that no region will be marginalised.

He said: “We need to understand that the candidate has control over who becomes his running mate during the election and who becomes the SGF, if he wins.

“The offices of senate president and speaker of the house of representative will be decided after the polls and based on what plays out in both houses. “Aside from major slots, I think what is paramount to the people of the South-West is restructuring of the country, which Atiku is very serious about. So the issue for the South-West is not personality or slot issue per say because personalities come and go but restructuring Nigeria is significant and more symbolic than zoned offices.”

With restructuring, Daniel asserted that “by the time Atiku finishes his tenure, the presidency won’t be attractive to anybody because he vowed to restructure Nigeria by delegating lots of power to both the state and local governments.’’ He said the edge Atiku has over other candidates is that he was once a vice-president, he is the eldest among them and he is set to address the problems of tribal and religious intolerance squarely .”

Atiku Abubakar speaks on reunion with Obasanjo, his endorsement by religious leaders

Presidential candidate of the Peoples Democratic Party, PDP, Atiku Abubakar has expressed excitement on the outcome of his meeting with former President, Olusegun Obasanjo.

The leaders met on Thursday at Obasanjo’s residence in Abeokuta, Ogun State.

Atiku wrote on his Twitter page after the meeting: “It was exciting meeting with my former boss and having lunch with him in Abeokuta.

Presidential candidate of the Peoples Democratic Party, PDP, Atiku Abubakar has expressed excitement on the outcome of his meeting with former President, Olusegun Obasanjo.

The leaders met on Thursday at Obasanjo’s residence in Abeokuta, Ogun State.

Atiku wrote on his Twitter page after the meeting: “It was exciting meeting with my former boss and having lunch with him in Abeokuta.

“Thank you for the prayers, Bishop Oyedepo. God bless Nigeria.”

Obasanjo had in the meeting endorsed Atiku’s presidential ambition.

He declared that Atiku will defeat the incumbent President, Muhammadu Buhari of the All Progressives Congress (APC) in 2019.

According to him, he believes that Atiku has ‘re-discovered and re-positioned himself’ and is now good enough to enjoy his support in the next election.

Obasanjo said, “Let me start by congratulating President-to-be, Atiku Abubakar, for his success at the recent PDP Primary and I took note of his gracious remarks in his acceptance speech that it all started here.”

At the meeting were outspoken clerics, Bishop David Oyedepo, Bishop Matthew Kukah and Sheikh Ahmed Gumi.

Also at the meeting were leader of apex Yoruba group, Pa Ayo Adebanjo, former Ogun State Governor, Otunba Gbenga Daniel, PDP National Chairman, Prince Uche Secondus, ex PDP deputy national chairman, Bode George, Senator Murray Ben-Bruce, ex Cross River Governor, Liyel Imoke, ex-Minister Osita Chidoka, among many others.