Every Nigerian general election since 2011 has been postponed, but never has it happened under such short notice and with so much at stake.
Leading economist, Bismarck Rewane, roughly estimates that the last minute postponement of Saturday’s elections could cost Africa’s biggest economy around $10 billion (N3.6 trillion at N360/$ exchange rate), 2 percent of 2018 Gross Domestic Product (GDP).
Rewane, who is the CEO of Financial Derivatives Ltd, a risk and financial advisory company based in the commercial capital of Lagos, arrived at his estimate after factoring in what he called postponement cost, consequential cost, opportunity cost and reputation cost.
The postponement cost of the Saturday elections is derived from dividing the country’s $427 billion GDP in 2018 by 365 days and that gives $1.16 billion.
Although the level of productivity in Nigeria is perhaps lower on a Saturday compared to a week-day, businesses priced in the elections as early as Friday, with most firms from banks to manufacturing companies working half-day to afford time to some members of staff who had to travel long distances to vote.
The consequential cost, according to Rewane, encompasses the cost to the electoral commission, INEC and other related costs. INEC’s budget for the 4-week election period was N189 billion. With the one-week delay, Rewane said, the electoral body must now factor in an extra week and additional N47 billion (N0.130 billion or N130 million). “That said, broader nominal consequential costs to parties other than INEC could be closer to $3 billion,” he added.
Then there is the opportunity cost which is shouldered by businesses and individuals who would have put the Saturday election date to a more productive use, but have had to hold-off any activity.
Some businesses seemed to have returned to work at around noon in Lagos after an initial frustration, but for many who travelled a good distance to vote, it won’t be that easy to reopen shop under such short notice.
Johnson Chukwu, CEO of Lagos-based asset management firm, Cowry Assets, who spoke to BusinessDay from south-eastern Nigeria where he had travelled to for the Saturday polls, was disappointed by the postponement at the eleventh-hour and decried the loss to economic activity.
“Today (Saturday) is an economic paralysing day and a major loss to businesses and the economy,” Chukwu told Business Day.
Rewane estimates the opportunity cost to aggrieved businesses to be anywhere between $4 to $5 billion, “to start with.”
Then there is a reputation cost which affects the financial markets from stocks to foreign exchange.
The exact cost would be difficult to predict but it is always a multiple of aggregated costs, Rewane said. “In the end, the economy may well lose as much as $10 billion to this poorly timed postponement,” he added.
It is not the first time Nigerian elections are being postponed.
A week before the 2015 vote that saw President Muhammadu Buhari defeat then incumbent President Goodluck Jonathan, it was moved back by more than a month. In 2011, it was a similar story, as elections were postponed mid way into the national assembly vote.
However what makes the 2019 delay different from previous ones is the timing. While the 2011 and 2015 votes were postponed nearly a week before, the electoral body announced a postponement for Saturday’s election at 2am, barely five hours before the vote. By then provisions had been made for an election but it would later be cancelled under such short notice.
The financial markets did not suffer a severe sell-off in any of the postponements in 2011 and 2015, but this time, it is inevitable, as investors sense political machinations at play with the last minute delay.
The delay also brings with it some degree of uncertainty post-election.
That is because, whatever the outcome of the re-arranged election, the losing party is likely to contest it and make allegations of rigging by the winning party. That could carry on for days, perhaps even month, as the courts try to find a truce.
“The markets did not suffer in 2015 because Jonathan conceded defeat and there was no need for a tribunal,” Rewane said. “This time, the losing party could put up a fight to contest the result.”
The financial market is not the only one to feel the pain of the botched election, young Nigerian youth corpers who were co-opted to help in the vote were stranded and international observers with return tickets carrying a specific date of departure face an unforeseen set back that will cost them time and money.
“We are utterly gutted,” one international observer who craved anonymity told BusinessDay as he was not authorised to speak publicly. “The INEC has lost some credibility and at this point, no one is a 100 percent sure that the elections will even happen on the re-scheduled day next week,” the person said.
“Elections happen in emerging markets that are much bigger then Nigeria routinely, it is quite demeaning that this election has been postponed for logistic challenges at the eleventh hour,” the person added.
Kyari Bukar, former chairman of the Nigerian Economic Summit Group (NESG), a private sector think-tank, says the delay is an indication that the INEC chairman is inept as a project manager. “The market will react negatively to this for sure, as investors and fund managers have little tolerance for uncertainty.”
Wale Okunrinboye, head of research at Lagos-based Pension fund manager, Sigma Pensions, expects a market sell-off and an end to a short-lived rally.
“The market enjoyed a mini rally last week and closed in the green Friday as investors priced in a smooth election; We expected the rally to continue post Saturday’s election as some investors had pencilled next week to take on more Nigeria exposure, but with this they are sure to hold off any investments and the market will surrender any gains from last week,” Okunrinboye said Saturday morning.
Yields on the benchmark government bond, a ten-year paper, closed lower at 14.68 percent Friday. That put the risk premium on Nigerian bonds at a year-low of 12.01 percent given that the US ten-year bond returned 2.67 percent as at market close Friday.
At 12.01 percent, Nigeria’s risk premium is down from 13.03 percent as at the beginning of 2019. At that time the yields on the Nigerian bond was 15.57 percent while the US bond yielded 2.54 percent. Although Nigerian bonds have a broader emerging market rally to thank for the narrowing risk premium.
The stock market has also had a mini-rally in February, following a tepid January. The rally boosted the 2019 year to date performance of the NSE ASI to 3.1 percent as at Friday, Feb. 15.
Ahead of the elections, it was expected that investors will take positions in order to benefit from a post-election rally, with the level of momentum dependent on who the eventual winner might be.
The naira also strengthened at the Investors and Exporters window, Friday, after closing lower at N361.65 per dollar, the lowest this year, according to FMDQ data.
“The rally is likely to come to an end next week as investors react negatively to the election postponement which has thrown up unforeseen confusion,” Chukwu of Cowry Assets said.
Uche Uwaleke, professor of economics and head, banking and finance department at Nasarawa State University said, “The postponement of the general elections by the INEC has monumental adverse economic impact not only on the government but also on firms and individuals.
This cost is escalated by the fact that the announcement came on the very day the elections were to be held after a number of irreversible steps had been taken by various economic agents and actors. Many people had traveled far distances just to exercise their franchise before the INEC decision while many organisations especially educational institutions had to shut down temporarily for the period of the elections. The associated costs of doing so cannot be quantified.
Just how do you measure the huge losses on the part of individuals from cancelled wedding, burial and other ceremonies already scheduled for Feb 23 and March 9, the new dates picked for the elections? How about production plans by business firms already made with the original elections dates in mind that will now be shattered? What about the disruptions in domestic and international flight arrangements? One could go on and on. Because the announcement wasn’t made early enough, business activities will be very low on Feb 16. A number of markets and businesses will be shut for most part of the day.
The reopening of land borders eventually will be after the closure announced earlier had taken its toll on the economic activities of border communities. The cost to the political parties and election observers can better be imagined. Some of the parties may not have the resources to foot the extra bill given that their agents had already been mobilized.
Ditto for election observers especially international observers, some of whom may have to return before March 9 due to unanticipated hotel and other bills. This unfortunate development further confirms what is public knowledge that the huge cost of conducting elections in Nigeria is about the highest in the world even surpassing that of India, the world’s largest democracy with a population six times bigger than Nigeria. Recall that the sum of N189 billion was approved for INEC for the 2019 election.
This amount is more than the capital components of education and health budgets put together. If you consider the total sum of N242 billion approved for INEC and five other agencies for the conduct of the 2019 general polls, it is money that could have gone a long way in fixing critical infrastructure in this country. With elections now rescheduled, you can be sure that this cost will spike. Where will this extra sum be sourced if not from money already earmarked for capital projects?
So the opportunity cost is quite high. This development could widen the fiscal deficit and I hope it doesn’t amount to additional borrowing by the government. It also raises country risk for Nigeria. Any attempt to borrow externally will be at a higher cost. The information-sensitive stock market will be at the receiving end as I expect a bearish trend in the days ahead following this development. There is no doubt that this will have the effect of weakening investors’ sentiments and may even trigger further capital flight. I won’t be surprised if this first quarter of the year is characterized by lower capital importation and slower GDP growth. In the same vein, the Purchasing Managers Index reading for the month of February 2019 is bound to come in lower when compared to previous months.
Overall, the postponement of the elections due to ‘logistic reasons’ was avoidable and does not bode well for the nation’s economy. Going forward, in view of the huge cost of conducting elections in Nigeria and considering that elections were postponed in 2011 and again in 2015 and then now, isn’t it time we reconsidered the frequency of elections in Nigeria by amending the constitution to provide for a single term of say 5 or 6 years as opposed to the two terms of 4 years? This is my take.
Transport coys lament
At Okota Road in Isolo, Lagos, which parades many transport companies, the empty bus terminals tell the story. Chinye Obidi, a staff of Libra Motors, said the company, which plies the eastern and Abuja routes on its 18-seater Toyota Hiace buses, lost huge revenue as the company could not could load and convey passengers to different destinations on Saturday due to the general election and restriction on movement.
“We load over 10 buses everyday with the least fare going for N5,000. We also have over 15 bus terminals in Lagos alone, meaning that we load over 150 buses everyday from our Lagos terminal and that is huge revenue loss”, Obidi said.
God is Good Motors, also on Okota Road is also ruing its loss. The bus company, which is among the most patronized because of its modern approach to transportation, lost huge revenue from the many passengers who would have travelled but postpone because of the February 16 presidential election.
Parents, school owners react
Parents and school owners said they have been shortchanged and left stranded by the development. They stated that they are not happy with the decision of INEC to shift the date of the election, saying that it will have a huge impact on the school calendar earlier planned based on the February 16 date.
According to them, “It is alarming to think of the magnitude of disruption that this one week shift could have on the plans of parents and school owners”.
Franca Duke, an educationist with St Savoir School, Ikoyi Lagos said she saw this postponement coming adding that as an elite school, they get security briefing from Shell and British High Commission with a Briton sponsored Head teacher every Mondays and Wednesdays.
Duke however, observed that there are too many school running without yearly calendar. According to him, “This set of schools will be in a box now. Confused and not knowing what else to do”.
Commenting further on the impact, she opines that the impact is huge if no adequate planning put in place as back up. It means Common. Entrance, WAEC and Jamb classes will be disturbed and if care is not taken, Mass failure may occur.
She further said that parents may likely feel shortchanged but, again, fear of unknown gripped everyone including parents. “Again, takes me to every child getting adequate education to be able to form an opinion of good decision”, she said.
Sunday Attah, proprietor, Mandate Group of Schools, Igando Lagos said he is not happy with INEC’s decision to shift the election knowing that this will have a disruptive consequences on school calendar especially private school owners who plan their programmes ahead.
According to him, “It is quite sad that a lot of the times disruption in academic programmes does not speak well of managers of the economy”.
Attah observed that while public school have assistant from the government, private schools don’t have subvention so any disruption of their academic programme has serious consequences on the operation of the private schools.
Mark Adegoke a parent said told BusinessDay that it is a pity what INEC is doing our children who have been hurried back home from their school because of the election only for them to just postponed it at the 11th hour.
Adegoke pointed out that many parents are struggling to pay school fees of their wards to keep them in school and out of the streets, yet these children are forced to come home and some now engage in various vices.
According to him, “The shifting is not good for students when you consider that studies are disrupted, it affects them; imagine those who were in the middle of writing examinations having that flow disrupted.’’
Another parent, Anyanwu Ogochukwu said the INEC decision to postpone the election is worrisome adding that it would affect the productivity of the students. As a parent, the capacity of our children for productive interaction with their studies is being jeopardised.
According to him, “I do not trust this INEC. This abrupt shifting will impact the learning process of children and impact negatively on students. “This sudden announcement by INEC is affecting the students and even we the parents because unexpectedly these children are coming home which they did not plan for.”
Some Nigerians have also recounted their sadness over the disruption in their social and family lives occasioned by the postponement.
Kingsley Mbah, a Lagos-resident, fumed: “People have had to travel to participate in the elections, children returned home from their respective schools, wedding ceremonies and engagements were moved to next week and all foreign observers were accredited only to wake up to the news that the elections will no longer hold.
“The wedding of my sister we supposed to hold today, February 16th but we had to shift the wedding to 23rd of February because of the elections. The wedding cards have been printed, the hall has been booked and paid for, flights have also been booked for people to travel down and gifts have been inscribed in them the supposed date for the wedding.
“It will cost us so much to fix this and as I speak to you, my sister has been crying. She doesn’t know what to do or where to start from. Sadly, it is only in Nigeria people are taken for granted,”
Juliana Dike, told BDSUNDAY.
Hope Moses-Ashike, LOLADE AKINMURELE, KELECHI EWUZIE and Ifeoma Okeke
