For Nigeria’s economy to be on the part to full recovery, the outcome of the election slated for February 16 will have to be deemed successful, irrespective of whoever wins the election, according to experts last week at a breakfast business meeting organised by NASD plc.
Election year in any country always finds investors holding back on their level of capital commitments until the period passes. These experts say Nigeria is no different; however, the heightened political tension in the country makes the situation more precarious for businesses and investors.
Thus, a respite is likely when after the election, the winner is magnanimous in victory and the looser congratulates the victor, just like in 2015 when former President Goodluck Jonathan who lost the election called the winner, President Muhammadu Buhari, to congratulate him.
Bola Ajomale, managing director/CEO of NASD, said businesses listed on the platform were anxious to know what the outcome of the elections would be. A successful election will mean the outlook for 2019 is very bright for the business community and investors.
“A lot will depend on the outcome. If there is a quick resolution then, yes, the country will continue. If there is no quick resolution, then we are going to be in trouble. When there is trouble or peace it will reflect on the market,” Ajomale said.
Nigerian economist, Doyin Salami, noted that other indices that could put the economy on a sure footing include the fiscal policies of the new government. Should the incumbent President win the election, will there be economic reforms?
Salami observed that the sluggish growth had also reflected in the direction of the 2019 budget.
Nigeria’s economy is experiencing a fragile and weakening economic recovery pace, as the country has failed to grow higher than its population rate of 2 percent at the moment. The current economic growth rate is 1.8 percent and the Central Bank of Nigeria (CBN) has warned that the country could slip back into recession.
“Expect a tighter monetary policy,” Salami said, saying in addition, a win for the incumbent was likely to see current exchange rates as well as the interest rates maintained at the level they were, at least for the first half of 2019. This could change if the main opposition defeats the incumbent.
“Will the opposition appoint a new CBN governor?” Salami said the scenario could be retaining the current CBN governor until his tenure expires by June 2019, which also gives ample time to whoever is the new president to appoint a new CBN governor.
The economist expressed concerns over Nigeria’s continued dependency on oil revenue. Compared with Saudi Arabia, Nigeria is not an oil rich country but a dependent one. Hence, it is subject to even the minute reactions from global economy.
For instance, with the US economy contracting, Salami expects the interest rate of the country to head in the northern direction. A high interest rate in the US means the Nigerian naira is affected negatively.
Similarly, oil prices, which he said might not go beyond $61, means that the 2019 budget deficit will increase. Invariably, the government will need to borrow more to fund its projects.
Nigeria’s revenue is already contracting. Gross foreign reserves have gone down by nearly $4 billion as of July 2018; the government is expected to raise the deficit from higher taxes.
Ayomale however said investors were willing to invest in the country once there was more certainty in the business environment.
“We did see a lot of capital coming into the capital market in the form of long-term investment capital rather than trading capital. So, it is not money that came in and went out because they want to make a return, it was money that came in because they want to assist a company. We are seeing a lot of growth and we are seeing a lot of investments coming in,” Ayomale said.
Highlights of the event include the presentation of awards to companies that performed very well in 2018. Highest number of deals by volume went to Apel Asset Limited; CSCS Nigeria won the Most Compliant Security, and the Deal of the Year was received by Chapel Hill Denham for the acquisition of Ensure.
