How economic growth, business projects may suffer amid political activities

How economic growth, business projects may suffer amid political activities

As Nigeria gears up for the upcoming 2023 elections, there are fears that many public officers may be distracted by electioneering activities to the detriment of project implementation and economic growth. It is a recurring theme across many African countries that elections and the accompanying political uncertainties impact certain aspects of the economy, and Nigeria is not an exception.

The International Monetary Fund, projected that  Nigeria’s economy would grow by 3.4 per cent in 2022 but decline to 3.1 per cent in 2023. Ongoing political activities and the upcoming elections may be a major trigger for this decline. Economists have hinted at this possibility, warning the country, which is hard hit by the pandemic and the ongoing war in Ukraine, against an economic crisis.

Having contracts stalled and major projects abandoned seem to be a trend in Nigeria leading up to the polls. In the Implementation Status and Results Report for the Nigeria: COVID-19 Action Recovery and Economic Stimulus Program, it was disclosed that the upcoming election might delay the implementation of the project. The report read in part, “The other risks include the emerging fiscal situation in the Country and the upcoming general election will portend a substantial risk to the pace of implementation and achievement of targets and project development objective.” This $750m project aims to expand access to livelihood support and food security services, and grants for poor and vulnerable households and firms.

Beyond project implementation delay, there is the issue of high government spending, which often leads to an elevated budget. In 2021, the budget had a total expenditure of N13.59tn, with a recurrent expenditure of N5.64tn. Capital expenditure was N4.13tn, while money budgeted for debt service was N3.32tn. There was a fiscal deficit of N5.2tn.

For 2022, a budget of N17.12tn was passed against the N16.39tn that was proposed by the executive.  In the budget passed, recurrent expenditure was N6.91tn; capital expenditure, N5.47tn; debt service was N3.88tn and deficit of N6.39tn.

On the ballooning budget, a political economist and former presidential candidate, Prof Pat Utomi, stressed the need to hold politicians accountable, saying, “It is sad that we are not ready to hold politicians accountable. I think the people should pressure a forensic audit of every state government account to track the spending of our budget and where most of the money goes. This is why the budget is ballooning – the abuse of the public treasury.”

According to him, there was contempt for Nigerians among the political class and a higher number of political office holders were more concerned about themselves than the people.

He added, “There is an issue with the way we fund our politics in Nigeria. The man who borrows or steals several billion to run for Senate, governorship or whatsoever, it is only natural that his first obligation is to recoup his investments, pay off his creditors, and prepare for tomorrow before he thinks about the people.”

The inflated budget often provides financing for elections, experts have said. A Professor of Economics at the Olabisi Onabanjo University,  Sheriffdeen Tella, affirmed the increase in spending for elections. He said, “There are serious payments underground so that politicians can have money for the elections in the following year.”

A senior lecturer in the Department of Economics, School of Management and Social Sciences, Pan-Atlantic University, Dr Olalekan Aworinde, also affirmed that the inflated budget was mainly due to the need to acquire more money for the purpose of elections.

In a report by the Centre for the Study of the Economies of  Africa, it was disclosed that the need to win the hearts of the electorate and garner more votes via campaigns often pushed up government and contesting politicians’ spending in the months leading to the polls.  During electioneering activities, there seems to be a lot of money exchanging hands for different reasons. For instance, the primaries of the major political parties, especially the ruling All Progressives Congress and the opposition People’s Democratic Party, were said to be a major contributor to the dollar scarcity. Most of the aspirants, especially those contesting the presidential primaries, had to travel to states to woo delegates. As is customary in the nation’s election history, some aspirants often give dollars to the delegates in the run-up to the primaries and on election days. Some of the delegates are said to often support the highest bidder. While no aspirant has openly admitted to sharing dollars to delegates, the practice is believed to be commonplace in the nation’s electoral process.

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

Also, during this period, manufacturers in the country lamented the worsening scarcity of the United States currency, saying their inability to get the forex they needed and the excessive delay in getting the little available were killing their businesses.

Findings revealed that the scarcity, which drove up the exchange rate astronomically, was not unconnected with the party primaries as many aspirants were said to have mopped up the foreign currency in the banks and the parallel market to woo delegates. The President, the Association of Bureaux De Change Operators of Nigeria, Alhaji Aminu Gwadabe, said that towards elections in the country, it had become a norm for forex to be volatile, coupled with a supply squeeze. He said, “Do not forget that election years are associated with foreign exchange volatility, coupled with supply squeeze. This is also a political year, so you should expect this kind of situation.”

The election period is marked by increased spending by many of the political parties. Major political parties tend to spend millions of dollars. A lot of this money is suddenly taken out from bank accounts and black markets and unleashed into the market. This may create a scenario where there is suddenly a lot of money chasing limited amounts of goods. This may further elevate inflation figures.

An economist and Managing Director of Cowry Asset Management Limited, Johnson Chukwu, said that the development was expected as 2022 was a pre-election year, which demanded some spending to win over the voting population.

He said, “In the first place, one should expect that we are going to have an expansionary budget, given that the year is a pre-election one. So, the present government will engage in a lot of spending to improve their standing before the voting population.”

The Centre for the Study of the Economies of Africa, also said that presidential and general campaign periods were boom eras for the parallel foreign exchange market, and with huge dollar demands for political campaign activities, there would be imminent pressure on the value of the naira. This suggests that the country may keep battling with inflation, with electioneering activities as a contributory factor.

The CSEA further warned that foreign investors were often deterred during election periods, either in a risk-averse or risk avoidance posture. Their appetite for investments stalls prior to elections and this reflects a mindset to gauge the outcome of the elections before further investment decisions are made.  The PUNCH recently reported that capital importation into Nigeria’s agriculture sector tumbled from $237.83m in the fourth quarter of 2021 to $1.76m in the first quarter of 2022. This means that there was a 99.23 per cent decline within three months, according to the Nigerian Capital Importation report for Q1 2022 released by the National Bureau of Statistics.

The Chief Executive Officer of the Centre for the Promotion of Private Enterprises, Dr Muda Yusuf, expressed concerns about the inflationary implications of liquidity surge, alongside increased distractions of the political leadership from governance and economic management.

According to him, the increasing intensity and velocity of electioneering activities portended a number of headwinds for the economy, including inflation and delayed governance process.

The CPPE CEO also noted that major economic reform initiatives had been practically stalled because of the perceived political cost of such decisions as the government had rather opted for populist policies at a heavy cost to the economy. With a weak fiscal space, he warned that there would be an increase in the fiscal deficit, which would further plunge the country deeper into a debt crisis.

He noted that there was a high probability that the apparatus and resources of state were being deployed for electioneering activities by political appointees and elected officials, adding that the opportunity costs of such misappropriation for the citizens were very high, especially in the light of the weak fiscal position of the government.

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

He also expressed concerns about the voting population, as many of the voters were focused on short-term and immediate benefits of the political process rather than undertake very serious scrutiny of the capacity of the political parties or the political contenders to contribute to economic development.

A public affairs analyst, Victor Emejuiwe, stressed the disadvantage of high spending around electioneering activities in the country, saying, “The economy cannot grow at a sustainable level when resources that should be applied to productive sectors with the capacity to generate profits are distributed amongst a few segments of society.” He added, “Also, the probability that money largely deployed outside the productive sector is responsible for the current increase in inflation cannot be wished away.”

The CSEA stressed that although election spending was absolutely necessary, the huge costs might continue to haunt the country after the elections.