Isaac Anumihe, Abuja
In the buildup to 2019 general elections, activities piled up against the economy to the extent that portfolio investors withdrew a whopping N435.41billion from the capital market between January and July this year.
According to data from the Nigerian Stock Exchange (NSE), the total value of equities that took a beating in the process was huge by all ramifications as the nation’s bourse closed at N11.88 trillion on Friday, February 22, 2019 (eve of the election) as against a peak of N16.154 trillion on January 19,2019.
“Once there is any cause to fear, portfolio investors usually sell off their shares and can only come back when the environment is better; all of these create a lot of volatility in the market and may be one of the reasons why we do not have a lot of initial public offerings in the country,” a stakeholder told Daily Sun.
But the crisis in economy could not have worsened if the twelveth-hour election postponement that shut the economy for a period of one week further creating more anxiety did not happen. Domestic investors who were askance of what the economic policy of the new government would look like are even more disturbed.
Indeed, according to some observers, the huge spending before, during and after the elections may have further sent the fragile economy to the intensive care unit even as the massive electoral violence across the country sang the nunc dimitis. No one appears to be at ease at the moment even as the “winner takes all” posturing of the governing All Progressive Congress has shifted the battle to the National and State Assemblies.
Before now, a post published on Bloomberg.com, with the title; “A Buhari Win Would Limit the Growth Rebound in Nigeria”, gave an analysis that Buhari’s win will creative more challenges for Nigeria’s Gross Domestic Products (GDP) per capita against its peers in Sub-Saharan Africa.
The post reads; “If President Muhammadu Buhari wins another four-year term, it will probably mean more political interference in Nigeria’s economy and slower growth, according to research by Bloomberg Economics.
“The opening of the Egina offshore oilfield this month and the Dangote refinery next year will deliver a near-term boost, but low capital investment is likely to inhibit growth over the medium term.
“BE (Bloomberg) expects Nigeria, Africa’s largest oil producer, to keep losing ground in real GDP per capita against its peers in Sub-Saharan Africa.
The question begging for answer today is, “what would happen to Nigeria’s GDP per capita as President Buhari has been declared winner of 2019 presidential election?” it asks
However, stakeholders who are mainly Nigeria’s economic experts did not see a sudden rebound for the economy. They argued that it will take the fleeing investors sometime to come back even if the policy direction of the government is favourable to them.
An economy analyst and a professor in Bayero University, Kano, Badayi Sanni, agreed that although many foreign investors left Nigeria in the wake of the election, they are likely to come back to Nigeria because of Nigeria’s great potential.
“Certainly, there are some setbacks in the economy, but they are likely to be temporary. After the election crisis and post-election litigations, they are likely to come back because Nigeria has great potential for foreign investors, who will still come back to invest because the market is there” he assured.
But a development economist and a consultant to several African countries on economic matters, Mr Odilim Enwegbara, painted a gloomy picture of the economy. According to him, President Muhammadu Buhari’s economic policies will further deepen poverty and eradicate the middle class.
“Due to the flood of post-election litigations, certainly both foreign and domestic investors will continue to avoid Nigeria’s economy, more so, given Buhari’s economic socialism (buharinomics) which being government-led and being at war with the middle-class will further breed mass poverty,” he said.
Enwegbaro, argued that Buhari came to power in 2015 on the goodwill of Nigerian citizen who were yearning for a drastic change in their affairs.
But rather than fix the economy, create jobs, and end the paralysing insecurity in the country, the APC-led government failed on all three, to the extent that the economy within a year of Buhari’s ascendancy went into a recession.
Similarly, unemployment statistics have risen astronomically to the extent that in 2016 alone over 6 million jobs were lost with only about 7,000 jobs created.
The resultant effects include the sharp decrease in government revenue, deficit spending as domestic borrowings grew. With national debt and debt service obligations doubling, and now out of control, most foreign investors, in reaction left the country in large numbers. More worrisome is the fact that in the last four years Nigeria’s thriving middle-class economy has suddenly disappeared.
“Expectations from Buhari’s next level is not surprising as he has immediately informed Nigerians to get ready for tougher times, for a new mass economic austerity, from present economic socialism to the next level.
According to Enwegbara, “From N12.06 trillion national debt (1999 to 2015) to N24 trillion (2015 to 2019), Nigerians should guard against further economic setbacks in the next four years. This will happen as early as December 2020. What this will mean is the full disappearance of whatever is left of the country’s middle-class economy. There is the danger of worse mass poverty where 91 million citizens who joined the poverty club in 2018, will worsen to as high as 190 million out of 210 million population by early January 2021.
Advice for new government
The government must avoid allowing the economy to degenerate to crisis-point where it becomes extremely difficult for lenders to be ready to lend to the country again, even if the policy rate is raised to as high as 30. Getting to this bankruptcy point will mean lenders resorting to demanding to take over Nigeria’s strategic oil reserves and other important national assets. But should government refuse giving them such assets, then, they can go ahead to confiscate the nation’s offshore assets, including confiscating oil cargoes leaving the shores of the country.
Meanwhile, a capital market professor at Nasarawa State University, Lafia, Professor Uche Uwaleke, said that the slowdown of government activities will surely slow down the economic progress and this will affect the Gross Domestic Growth (GDP). He also said that the uncertainties of the 2019 elections which jolted many portfolio investors must settle down before they would be attracted to invest again.
“The impact of the general election on the economy was widely felt in so many ways. It brought about a slowdown in government activities as key officials of the administration were involved in political campaigns to deliver their constituencies. In this country, activities of government propel the private sector and so a slowdown generally affects the tempo of economic activities. Therefore, one will not be surprised if the GDP growth rate in the first quarter of 2019 is lower than the previous quarter. As a corollary, because members of the National Assembly are preoccupied with election campaigns, critical bills including the 2019 Appropriation Bill were delayed and this will negatively affect implementation. “Furthermore, the uncertainties associated with the 2019 election has scared away many investors as well as triggered capital flight. The result is low foreign portfolio investment and gradual depletion of external reserves which could have been higher than the current levels given the favourable international crude oil price. There is also the huge cost of conducting the elections to grapple with. INEC got over N180 billion to conduct the 2019 elections which must have been escalated by the sudden postponement of the Presidential and National Assembly elections. This huge sum could have been used to fix critical infrastructure or even deployed to education and health sectors where capital allocations have remained inadequate. So, the general elections involve huge opportunity cost. Only a free, fair and credible election will compensate for this cost and possibly reverse some of the negative effects as the polity normalises, clarity returns to the political space and investor confidence in the economy is rebuilt,” he asserted.