Nigeria Elections: It’s All About The Economy

Political reform and improved security, these are prominent issues expected to dominate the conversation once presidential campaigns officially kick off in Nigeria this month, but superseding it all is one overriding question – who has the political courage and leadership savvy to finally put Africa’s largest economy on the road to achieving its full potential?

There will be several candidates on the ballot when voters head to the polls on February 16, 2019, but it is really a two-horse race between current President Muhammadu Buhari, representing the All Progressives Congress (APC) party, and Atiku Abubakar, a former vice president who is the flagbearer for the People’s Democratic Party (PDP).

Two weeks later, on March 2, Nigerians will then vote to determine which party controls the National Assembly (made up of the House of Representatives and the Senate) – which plays a key role in implementing the president’s agenda. Unlike the United States, for example, there have been no instances of the divided rule in the history of Nigeria’s civilian governments. Scheduling the presidential elections before the National Assembly elections create a domino effect where the winners’ party goes on to win the most seats in the legislature – allowing them to govern backed by a majority.

Campaigning does not officially begin until November 18, and it is expected to be a close and unpredictable contest. Buhari and Abubakar both hail from the Northern part of the country, have experience in higher office and know how to work the system. Buhari, a conservative former general who is on his second tour as head of state – he led a military government from 1983 to 1985 – will have to defend his record and ease concerns about this health. Abubakar will need to keep up the pressure while hoping allegations about how he built his vast business empire do not derail his bid.

Abubakar has been dogged by accusations of corruption for many years, charges which he consistently denies, and the common belief is a lot of his support is fueled by prominent figures who have been damaged by Buhari’s anti-corruption crusade.

Buhari made fighting graft a central theme of his first term. Should he win a second term, the hope is the tempo of anti-corruption efforts will increase, along with judicial reform to improve efficiency and address the backlog of cases in the courts to deter would-be offenders.

One advantage for Abubakar is all his efforts will be focused on defeating one opponent, while Buhari will have to fend off attacks from the entire of field of candidates – even those who have zero odds of springing an upset victory.

The key will be what concrete plans each candidate has to manage the economy and, more importantly, how they would handle a downturn in government revenue should oil prices plunge again.

The International Monetary Fund expects Nigeria to grow by 1.9 percent this year – an improvement from 0.8 percent growth in 2017 – and by 2.3 percent in 2019 – mostly due to fewer disruptions in oil production and a minor rebound in the non-oil sector. Nigeria is also still recovering from a recent recession (economic activity shrank by 1.6 percent in 2016) and employment levels have yet to bounce back.

The country faces a range of complex economic problems, many that need strong management – not simple political solutions. Issues like broadening its tax revenue base, providing reliable sources of industrial inputs such as electricity, upgrading its oil sector, securing the health of its banking industry, and guarding against the knock-on effects of external volatility.

Looming over all of this, is the economy’s ongoing transition from an imperfect market, policy and, political structure towards a more open, economic reform-oriented structure. Previously, Nigeria’s leaders – strongly influenced by their military backgrounds – adopted a more ‘command and control’ approach to economic management, with fixed prices and regimented economic activity. Now, there is greater acceptance of a mixed economic model that combines some free-market principles with instances of government intervention.

The Buhari administration has had some missteps, while his main opponent has no tangible track record to evaluate. In his management of the economy during his first team, Buhari spent significantly on infrastructure projects to speed up the pace of the country’s development, with mixed results. He has also pursued policies intended to diversify economic activity.

Abubakar, as a prominent businessman is said to favor free-market economic principles in which the economic rebound is fueled by the private sector, and he could pursue such reforms with greater zeal but there are no guarantees he will be an effective policymaker. There also is the real risk of a surge in crony capitalism, where any efforts at privatization are geared towards further enriching himself and his inner circle.

Transitioning to a more market-determined economy will require competent leadership to achieve the desired outcome, as political bravery is needed to eliminate subsidies on items such as fuel, power generation and address its fixed currency policy.

The government’s reluctance to follow a floating foreign exchange regime for the Naira is tied to the economy’s dependence on imported goods – there are two official exchange rates, one at which it sells U.S. dollars to local companies to purchase foreign products, and the other for foreign investors in Nigerian bonds and equities.

A deterioration in economic conditions is never far-off, and Sub-Saharan Africa, Nigeria included, could witness large outflows of foreign capital as the US Federal Reserve continues to raise rates – constraining financing and growth. The question is will the next government revert to type with their response – by imposing restrictions and capital controls – or explore a new path using an adjustment mechanism or by seeking multilateral financing.

Risk Factors

Risks such as outbreaks of violence, rising borrowing costs, and volatile oil prices will require a leader who is forward-looking and can effectively manage these challenges. Nigeria’s leadership in the past has prioritized responding to immediate crises, and it is not immediately clear if either of these candidates will be more forward-looking in their approach.

Terrorist group, Boko Haram, remains a major threat, but the Buhari government has made some inroads in containing them. However, there are other issues bubbling on the security front, including; cattle rustling and religion-fueled clashes in North-West Nigeria, as well as fatal confrontations between farmers and herdsmen in the central part of the country over land. And while it has been two years since the attacks on pipelines in the oil-rich South, there continues to be a nervous détente in the region.

The IMF report noted that in Sub-Saharan Africa, the largest number of incidents of civil unrest and terrorism in the past five years occurred in Nigeria, albeit with declining frequency. The country’s security situation is a symptom of its citizens’ economic vulnerability, and incidents will keep popping up in different parts of the country unless the underlying fundamentals are addressed.

Political restructuring is another topic gaining currency, with growing calls within the country – particularly in the South – to overhaul the system of governance and return to its Federalist roots by ceding more authority to the states.

Supporters argue that too much power is concentrated in Abuja, with the federal government controlling the country’s resources, and that states should have more latitude to run their own affairs.

So far, both candidates have voiced their support without providing concrete details about how they would implement the process. It should also be noted that this move, if successful, would not be a panacea for what ails Nigeria. Even with true political restructuring, the outcome will be the same unless root problems such as incompetent and inefficient governance are addressed.