Event

Nigeria is about to host the most fiercely contested election since the end of military rule in 1999, fought out between the ruling People’s Democratic Party (PDP) and a coalition of major opposition parties supplemented by defected PDP members, the All Progressives Congress (APC). The ruling PDP is led by southern Christian incumbent President Goodluck Jonathan, while the APC’s candidate is the ex-military ruler and northern Muslim Muhammadu Buhari, adding great regional and ethnic tension to the vote. Early February it was decided that the national elections would be postponed for six weeks, based on the warning of security chiefs that electoral security could not be guaranteed given the large number of troops needed in the north to fight Boko Haram. Postponed presidential and parliamentary elections are scheduled for 28 March, with state and governorship elections due on 11 April.

Impact on country risk

Insecurity concerns are presumed to be used by the government and its military rank as a desperate attempt to avoid losing the vote and their associated privileges, not in the least shelter from (corruption) persecution. Ironically, President Jonathan’s chances of winning have further deteriorated due to worsening economic indicators - caused by the international oil price shock and waning investors’ confidence - on top of the public desertion of his mentor, former president Obasanjo. The sharp drop in oil revenues has eroded external surpluses and put great pressure on the local currency, leading to rising inflation and a plunge in foreign exchange reserves despite the devaluation of the naira against the dollar by 8% in November. The postponement of the elections brought another run on the naira and the growth outlook for 2015 was revised down by the IMF to 4.8%, coming from 7%. With depleted buffers, deficit spending will inevitably increase external debt levels. This will however not significantly worsen Nigeria’s debt sustainability, given the country’s current low risk for debt distress.

nigeria

Jonathan might be put under great pressure by senior PDP figures to engineer another postponement if the PDP’s chances do not improve by end of March. Hereafter, rioting and violence between protesters and the police would become very likely. The timetable might moreover be pushed beyond constitutional limits, which could put the country in a state of emergency and leave power to the military or an interim regime. Due to important fractions inside the army, such a scenario could furthermore bring about ‘counter-coups’. On the other hand, if the elections do take place and the APC loses, results are likely to be disputed on the back of vote rigging allegations. Either way, the risk for destabilisation in Africa’s biggest economy has increased significantly, which could have an impact on the entire region.

Analyst: Louise Van Cauwenbergh, l.vancauwenbergh@credendogroup.com