CPPE worries about election-fuelled inflation, distractions from governance

Notwithstanding increased liquidity the economy may enjoy from electoral activities, the Centre for the Promotion of Private Enterprises (CPPE) has expressed concerns about the inflationary implications of liquidity surge, alongside increased distractions of the political leadership from governance and economic management.

According to the CPPE, the mounting intensity and velocity of electioneering activities portend a number of headwinds for the economy, some of which include inflation and delayed process of governance.

The CPPE noted that major economic reform initiatives have been practically stalled because of the perceived political cost of such decisions as the government has rather opted for populist policies at a heavy cost to the economy.

With a weak fiscal space, it warned that this would increase the fiscal deficit and plunge the country deeper into a troubled debt situation.

For investors, the CPPE stated that the level of uncertainty is generally higher in a season like this.

“It is much more difficult to plan for a long-term horizon because of the elevated political risk in the economy. Many important business decisions have been put on hold, especially for long term projects. The effect is that the economy suffers as a result of these delayed decisions. This could further dip the growth outlook.

“The focus of many investors at this time will be short term in order to manage the risk inherent in the uncertainty arising from the electioneering processes and the impending political transition”, it added.

Indeed, the CPPE noted that there is a high probability that the apparatus and resources of state are being deployed for electioneering activities by political appointees and elected officials, adding that the opportunity costs of such misappropriation for the citizens are very high, especially in the light of the weak fiscal position of governments at all levels.

Chief Executive of CPPE, Dr Muda Yusuf warned that approval processes for government transactions may suffer undue delays at all levels of government – federal, states and local governments amid numerous distractions driven by electioneering activities by political appointees and elected officials.

“Political attention to governance and economic management gets characteristically weakened as political office holders seek desperately to retain their offices in the next dispensation. This would adversely impact the business of government.

“The regularity of legislative activities has decelerated markedly as legislators at the federal and state assemblies devote more attention to electioneering activities to retain their seats or prospecting other opportunities in the political space. Many important bills pending for consideration are likely to suffer delays.

“The oversight activities of the legislators have also been practically put on hold as a result of the electioneering and political activities. Many legislative houses are struggling to form a quorum”, Yusuf added.

The CPPE also expressed concern about the voting population, describing them as also not helping matters as most of the voters are focused on short term and immediate benefits on the political process rather than undertake very serious scrutiny of the capacity of the political parties or the political contenders to contribute to the development of the economy.

“Consequently, the economy is witnessing a flurry of cash, in domestic and foreign currency. Cash within the banking system have been significantly depleted in the past one-month and trend is likely to continue till 2023. The economy is awash with cash, which has implications for liquidity, for aggregate demand and surge in price level”, it warned.