Nigeria’s delayed elections brings $10bn loss to economy - Rewane

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.