How economic growth and business plans can suffer amid political activity

As Nigeria prepares for the upcoming elections in 2023, there are fears that many officials will be distracted by electoral activities to the detriment of project implementation and economic growth. It is a recurring theme in many African countries that elections and the political uncertainties that accompany them have an impact on certain aspects of the economy, and Nigeria is no exception.

The International Monetary Fund has projected the Nigerian economy to grow by 3.4% in 2022 but fall to 3.1% in 2023. Ongoing political activities and upcoming elections could be a major trigger for this decline. Economists have hinted at this possibility, warning the country, hard hit by the pandemic and the ongoing war in Ukraine, of an economic crisis.

Having contracts stalled and big projects shelved seems to be a trend in Nigeria ahead of the elections. In the Implementation Progress and Results Report for Nigeria: COVID-19 Action Recovery and Economic Stimulus Program, it was revealed that the upcoming elections may delay the implementation of the project. The report reads in part as follows: “Other risks include the emerging fiscal situation in the country and the upcoming general elections will portend a substantial risk to the pace of implementation and achievement of the goals and development objective of the project”. This $750 million project aims to expand access to livelihood and food security support services and subsidies for poor and vulnerable households and businesses.

Beyond the delay in the implementation of projects, there is the problem of high public expenditure, which often leads to a high budget. In 2021, the budget had total expenditure of 13.59 tn, with recurrent expenditure of 5.64 tn. Capital expenditure was N4.13 billion, while funds budgeted for debt service were N3.32 billion. There was a fiscal deficit of N5.2tn.

For 2022, a budget of N17.12tn was passed against the N16.39tn proposed by the executive. In the enacted budget, recurrent expenditure was N6.91 billion; capital expenditure, N5.47tn; the debt service was 3.88 billion naira and the deficit was 6.39 billion naira.

On the bloated budget, a political economist and former presidential candidate, Professor Pat Utomi, stressed the need to hold politicians accountable, saying: “It is sad that we are not ready to hold politicians accountable. I think people should push for a forensic audit of every state government account to track how our budget is spent and where most of the money is going. This is why the budget is inflated – the abuse of the public purse.

According to him, there was contempt for Nigerians within the political class and more political office holders were more concerned with themselves than with the people.

He added: “There is a problem with the way we fund our policy in Nigeria. The man who borrows or steals billions to run for the Senate, for the post of governor or otherwise, it is natural that his first obligation is to recover his investments, repay his creditors and prepare for tomorrow before thinking of the people.

The bloated budget often provides election funding, experts said. An economics professor at Olabisi Onabanjo University, Sheriffdeen Tella, affirmed the increased spending for the elections. He said: “There are serious underground payments so that politicians can have money for the elections the following year.

A lecturer in the Department of Economics in the School of Management and Social Sciences at Panatlantic University, Dr. Olalekan Aworinde, also claimed that the inflated budget was mainly due to the need to acquire more money. for the elections.

In a report by the Center for the Study of African Economies, it was revealed that the need to win the hearts of the electorate and garner more votes through campaigns has often driven up government and politicians’ spending. protesters in the months preceding the elections. . During election activities, there seems to be a lot of money changing hands for different reasons. For example, the primaries of the main political parties, in particular the ruling party, the All Progressives Congress and the opposition party, the People’s Democratic Party, would have largely contributed to the scarcity of the dollar. Most of the contenders, especially those contesting the presidential primaries, have had to travel to states to woo delegates. As is customary in the country’s electoral history, some candidates often donate dollars to delegates in the run-up to primaries and on election days. Some of the delegates are said to often back the highest bidder. Although no candidate has openly admitted to sharing dollars with delegates, the practice is believed to be common in the country’s electoral process.

A former president of the Pharmaceutical Society of Nigeria, Sam Ohuabunwa, observed that delegates could not resist the $10,000, $15,000 and $20,000 offered to them at the PDP’s special presidential convention. According to him, the effect of money was overwhelming in the choice made by the delegates.

Additionally, during this period, the nation’s manufacturers lamented the increasing scarcity of US currency, claiming that their inability to obtain the currency they needed and the excessive delay in obtaining what little was available was killing their businesses.

The results revealed that the shortage, which caused the exchange rate to soar astronomically, was not unrelated to the party primaries, as many aspirants reportedly mopped up foreign currencies in banks and the parallel market to woo delegates. . The President of the Association of Bureaux De Change Operators of Nigeria, Alhaji Aminu Gwadabe, said that as elections approached in the country, forex volatility had become a norm, coupled with a shortage of supply. He said: “Remember that election years are associated with currency volatility, coupled with supply squeeze. It is also a political year, so you should expect this kind of situation.

The election period is marked by an increase in the expenses of many political parties. Large political parties tend to spend millions of dollars. Much of this money is suddenly withdrawn from bank accounts and black markets and released into the market. This can create a scenario where there is suddenly a lot of money for limited amounts of goods. This can further raise the inflation figures.

An economist and managing director of Cowry Asset Management Limited, Johnson Chukwu, said the development was expected because 2022 was a pre-election year, which required spending to win over the voter population.

He said: “In the first place, it is to be expected that we will have an expansionary budget, given that the year is pre-election. Thus, the current government will incur a lot of expenses to improve its position with the electoral population.

The Center for the Study of African Economies has also said that presidential and general campaign periods are boom times for the parallel foreign exchange market, and with huge dollar demands for political campaign activities, it there would be imminent pressure on the value of the naira. . This suggests that the country may continue to struggle with inflation, with election activities being a contributing factor.

The CSEA further warned that foreign investors are often deterred during election periods, either in a posture of risk aversion or risk avoidance. Their investment appetite stagnates ahead of the election and this reflects a mindset to gauge the outcome of the election before other investment decisions are made. According to the Nigerian Capital Import Report for the first quarter of 2022 published by the National Bureau of Statistics.

The Director General of the Center for the Promotion of Private Enterprise, Dr. Muda Yusuf, expressed concern over the inflationary implications of the surge in liquidity, as well as the increased distractions of political leaders from governance and economic management.

According to him, the increasing intensity and speed of electoral activities portends a number of headwinds for the economy, including inflation and the delay in the governance process.

The CPPE CEO also noted that major economic reform initiatives have been all but stalled due to the perceived political cost of such moves, with the government instead opting for populist policies at the expense of the economy. With weak fiscal space, he warned that there would be an increase in the budget deficit, which would plunge the country further into a debt crisis.

He noted that there was a high likelihood that the apparatus and resources of the state would be deployed for electoral activities by political appointees and elected officials, adding that the opportunity costs of such misuse for citizens were very high, especially in light of the government’s weak fiscal position.

Yusuf warned that government transaction approval processes could face undue delays at all levels of government – ​​federal, state and local – amid many distractions from the election activities of political appointees and elected officials.

He also expressed concerns about the voter population, as many voters focused on the short-term and immediate benefits of the political process rather than undertaking a very serious examination of the ability of political parties or political candidates to contribute to the economic development.

A public affairs analyst, Victor Emejuiwe, pointed to the downside of high expenditures related to electoral activities in the country, saying, “The economy cannot grow at a sustainable level when the resources that should be applied to the productive sectors capable to generate profits are distributed among a few segments of society. He added: “Furthermore, the likelihood that money widely deployed outside the productive sector is responsible for the current rise in inflation cannot be ruled out.”

The CSEA pointed out that although the election expenses are absolutely necessary, the enormous costs could continue to haunt the country after the elections.