Polls Postponement Has Further Weakened The Economy, Says Expert

ECONOMISTS, financial analysts and market watchers are of the view that the postponement of the 2015 general elections has increased risks in an economy already under pressure from the slump in oil prices and alarming withdrawal of several Foreign Direct Investments (FDI)

  The Independent National Electoral Commission (INEC) had on February 7 announced that the presidential and National Assembly elections earlier scheduled for February 14 would now hold on March 28 while the governorship and House of Assembly elections earlier slated for February 28 would hold on April 11.

  Speaking on the effects of the shift of the election dates on the economy, a financial Analyst with a Lagos based financial agency, Mr. Olaniyi Adekeye, noted that “this is just going to increase the uncertainty in Nigerian markets.” 

  He added: “While the increased violence is a big concern, investors’ more immediate focus has been on the impact of lower oil prices on the currency and public finances. They need to get some sense of where this currency is heading to make a good judgment call on investments.” 

  According to him, the forces of demand and supply determine the value of the Naira. Since Nigeria is a mono-economy and depends largely on the revenue derived from the sales of crude oil, that is the only major way dollar flows into the economy as well as Foreign Direct Investments (FDI). 

  “The falling price of crude oil internationally led to the devaluation of the Naira and so fewer dollars are coming in because of this.”

  But the final nail in the coffin, according to him, is the loss of the FDI, which is tied and influenced greatly by the political climate. “Because of the unrest and uncertainty in the polity presently, many foreign investors are pulling out into safer economies and potential investors are staying away because of the shift in the polls. This has led to less dollars being in circulation and putting immense pressure on the already weakened Naira, ultimately ruining the stock market.” 

   Adekeye said the CBN was trying to support the Naira but there was little or nothing it could do as it also depends

  on the forces of demand and supply. “They are trying to inject dollars into the economy but with the demand being more than the supply, they are up the proverbial creek without a paddle. If the elections had gone on as planned, by the end of February, economic stability would have returned and urgent measures would have been put in place by the CBN to support the Naira. But as the polls have been shifted further, many investors have lost interest and before stability would return, half of the economic year would be wasted.” 

  He opined that if the election goes well, foreign investors would invest in the economy and the Naira would respond, bringing a bit of stability to the economy. In his words, “the direction of the price of crude oil will take in the international market is also a major factor which would determine how well the Naira does after the elections, if all goes well. Really, investors are just waiting for the elections to be over, so expect the situation to remain the same or even worse before it gets better,” he said.