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Elections! Economically speaking…


Naira notes: Photographer: George Osodi/Bloomberg via Getty Images

The run-up to Nigeria’s presidential elections garners interest from both the domestic and international communities.

Given that the macro environment is closely linked to politico-economic activities and the general notion is that elections bring a loss of macro discipline, examining economic trends during election periods is necessary.

An extensive look at inflation reports during these election cycles shows that food inflation posted very small increases in Q4 2010 and Q4 2014 (i.e. the quarter leading up to election in the respective years).


As for the 2019 election, clashes between farmers and herdsmen in growing areas appears to have had a larger impact on food inflation than electioneering.

Other than benign food prices, the main reason for the containment of inflation ahead of elections has been the exchange-rate regime. This exchange-rate regime has been supported by a firm oil price.

Bonny Light (spot) averaged US$61/b in the eight months before the 2007 polls, US$99/b in the run-up to 2011’s and US$68/b in the eight-month period leading up to the 2015 election.

As for foreign exchange reserves, there was an 21% y/y increase recorded by end-December 2007; there was also an increase, but by just 2% y/y, posted in end-December 2011 while end-December 2015 reserves declined by over 8%.

The reduction in reserves for the latter can be linked to the oil price slide and production challenges the country faced at the time.

The build-up to elections can result in a flight of foreign portfolio investors (i.e. offshore investors).

This occurs when a serious contender has an anti-business agenda or where markets fear a very close result challenged on the streets and in the courts.


The results of the last three presidential elections in Nigeria have not resulted in this scenario nor have plausible candidates threatened radical change.

Meanwhile, the principal, non-electoral reason for net outflows was the downward trend in the oil price from an average of US$102.3/b for spot Bonny Light in August 2014 to US$57.5/b in April 2015.

As the oil price weakness continued so the Nigerian Stock Exchange All Share Index lost ground and the economy slowed, leading to the recession of 2016 and Q1 2017.

The net outflow data are not readily available for 2007 and 2011 and so it is difficult to make further comparisons.

On a fiscal note, based on official data released by the CBN, there was a sharp fall in FGN spending at the time of and immediately after elections. The habitual delay in budget passage may have caused this.

In 2015, total FGN expenditure was N4.8trillion with a fiscal deficit of N1.6trillion. In 2011, FGN expenses hit N4.2trillion (slightly lower than 2009) with a fiscal deficit N817billion.

However, there was a rise in FGN spending in the build-up to the 2011 elections when compared to the previous year due to the substantial increase in the national minimum wage.


The GDP growth figures for 2007, 2011 and 2015 were 6.6% y/y, 5.3%y/y and 2.7% y/y respectively.

For the latter, the economic shock from slippage in global oil prices was the core reason for the slower pace in growth during the 2015 election year.

Given that Nigeria depends heavily on its oil revenue, this put pressure on the economy. However, there has been some recovery in oil prices since then.

Three election cycles ago i.e. 2007, the outperformers in terms of sectorial growth were telecommunications and technology services, trade and the segment which captures ‘hotels and restaurants’.

This points towards healthy consumption spending and some level of ease on consumer pockets. This trend was similar in 2011.

However, the arts and entertainment industry took the top position. As for 2015, the pace of growth for most sectors slowed visibly.

The general opinion is that tightly contested elections in Africa automatically result in instability and macroeconomic slippage.

Hopefully, the margin of victory (small or large, whichever) from this year’s election will not lead to this.

However, one thing is for sure- there would be a sigh of relief when the election process is completed.

Chinwe Egwim is Macroeconomist at FBNQuest Merchant Bank

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