Nigeria’s Economic Pain May Not Decide Election

Nigeria is suffering from a plummeting currency, steep budget cuts, corruption scandals and diving oil prices; yet all this is unlikely to decide a tight race for the presidency.

In many other democracies, such turmoil would probably propel the incumbent from office. A likely rise in inflation in Africa’s biggest economy is unwelcome for President Goodluck Jonathan, who is seeking re-election on Feb. 14 next year.

But many Nigerians appear willing to give him the benefit of the doubt, while others will vote according to regional, sectarian or ethnic loyalties in the most closely fought election since the end of military rule in 1999.

Jonathan faces main opposition contender, ex-military leader Muhammadu Buhari, with the naira currency devalued 8 percent in the past month and a budget slashed by around 10 percent, both due to a near halving of world oil prices since June.

Yet any undecided voters appear unlikely to be swayed by economic hardship whose immediate cause lies in global markets.

“We are really suffering from the high dollar, but you can’t blame President Jonathan for that. He can’t control the dollar,” said Daniel Ibere, whose sales of electronic goods in Lagos’s overcrowded Eko Idumota market dropped when he raised prices.

 Buhari is likely to benefit from a perception that Nigeria was ill prepared for the energy price shock because so much revenue from oil, its dominant export earner, has been lost to corruption under Jonathan’s administration. He is regarded as a rare example of a graft fighter when president in 1983-85.

When the central bank devalued the naira last month to save foreign reserves, the impact was felt instantly on the streets. Nigeria imports 80 percent of what it consumes.

“Everyone is crying and complaining,” said Ifeanyi Onuchukwu, a clothes wholesaler in the capital Abuja. Onuchukwu tried to raise his prices 10 percent, but the traders wouldn’t buy his wares so he suffered losses.

Economist Bismarck Rewane thinks inflation will hit double digits for the first time in two years by January. “That’s a difficult situation for Jonathan. You really don’t need this two months before an election,” he said.

But a bigger headache comes from allegations that billions of dollars of revenue have “leaked” at the state oil firm, according to ex-central bank governor Lamido Sanusi, among others. Jonathan removed Sanusi in February after he made the allegations.

Critics argue this is one reason why Nigeria failed to build up a savings cushion when oil prices were high. Buhari’s campaign has focused on the economy and alleged corruption.

“The lives of the poor are bled dry while those of the powerful soak in excessive abundance,” he said on Thursday after winning the opposition ticket.

This, however, may not be enough to sway an electorate divided along lines that for the most part have little to do with policy.

Nigeria has been dogged by regional rivalries since independence from Britain in 1960. It suffered a catastrophic civil war in the late 1960s and even today, many Nigerians vote for candidates from their own area or an allied ethnic group. Those who can widen their geographical appeal gain a distinct advantage.

“Policy has never been a great part of politics … If you look at the last election, Buhari lost because he didn’t win as many votes outside his area as Jonathan did outside his,” said Anthony Goldman of Nigeria-focused PM Consulting.

He added that the economic problems could cut either way, since “there’s sometimes a ‘better the devil you know’ factor” in times of crisis in Nigeria, a generally conservative country.

The other factor is money. Vast patronage is often needed to get communities to vote for a candidate, so the incumbent who controls the oil wealth enjoys an advantage.

This time money is running extremely low, and Nigeria’s fiscal position always weakens around election time.

However, a parliamentary source said the funds needed to pay for campaigns on both sides had mostly already been stockpiled before the oil price crash, so the impact may be minimal.

While Nigeria faces a more austere budget, its debt remains low, certainly when compared with the developed world.

“Nigeria with its low debt ratios and fairly liquid markets has more capacity than most to increase borrowing … to see it through a short-term price shock,” says Razia Khan, Standard Chartered’s Head of Africa Research.

And since suitcases of dollars are the preferred means of delivering patronage – carrying funds in naira bills would require trucks – election spending is likely to increase the supply of U.S. currency in the short term. That bodes well for the naira, which has steadied in a week of electoral primaries.

“Huge dollar spending by politicians on both the (ruling) PDP and (opposition) APC primaries saw the Lagos bureau de change markets awash with dollars,” Business Day splashed on its front page on Friday. “This may have contributed significantly to the appreciation of the naira.”

Credit: Yahoo News

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