What you need to know about Nigeria’s elections: Capital Economics

By Capital Economics

In the final stretch before Nigeria’s elections on Saturday, we answer key questions about the polls and the economic consequences of the vote.

What’s at stake? 

Nigeria is not only Sub-Saharan Africa’s most populated country, but also the region’s largest economy. The elections could mark a turning point after years of economic mismanagement under outgoing President Muhammadu Buhari, who has overseen a period of lacklustre growth, high inflation and rapidly rising public debt. 

How does Nigeria’s election process work?

Voters will elect a new president as well as members of parliament on Saturday 25th February. To win the presidency outright, a candidate not only has to get the most votes overall, but also secure more than 25% of votes in at least two-thirds of Nigeria’s states. Otherwise, the race goes to a run-off.

What are the main candidates’ economic platforms?

By and large, the ruling APC party’s Bola Tinubu offers continuity. This includes embracing protectionist policies, a loose fiscal stance and a heavy reliance on the key oil sector as well as a heavily managed exchange rate regime that are cornerstones of “Buharinomics”. Opposition candidates Atiku Abubakar and Peter Obi offer a more marked shift towards market-friendly policies. That said, under the hood, the pro-business campaign of the PDP is somewhat half-hearted. This is reflected in FX proposals for instance, with Mr. Abubakar not ruling out retaining two exchange rates. On the naira as well as economic policies more broadly, the Labour Party manifesto represents the most pro-market proposals. But Mr. Obi’s pledge to close Nigeria’s perennial budget deficits could weigh on growth.

Who is favoured to win? 

In what is usually a two-horse race between the APC and the PDP, Mr. Obi emerged as a credible third force with polls putting him in the lead. But with a far less established campaign compared to that of the APC and the PDP, Mr. Obi probably still faces an uphill battle, leaving Mr. Tinubu as the favourite.

What key challenges will the next president face?  

The incoming president’s in-tray will certainly be full. Five sets of interlinked challenges are worth highlighting. First, attention is likely to turn most immediately to easing disruptions from botched demonetisation efforts. Second, security issues (notably pervasive oil theft) will be high on the agenda. The third is addressing production problems in the key oil sector. That said, we’re sceptical that the “mainstream” contenders’ ambitious oil output targets would come to full fruition. Fourth is improving the balance of payments position, which will remain fragile in the absence of meaningful exchange rate liberalisation. Fifth, reversing the worsening trajectory of the public finances will not only require scrapping costly fuel subsidies that all key candidates support, but also broader fiscal reforms that are more likely under an Abubakar- or Obi-led government.    

What is the upshot? 

From an economic standpoint, the polls offer a choice between marginal steps away from growth-sapping policies and a more meaningful shift towards pro-market reforms that could unlock Nigeria’s long-term economic potential. But unshackling the economy from unorthodox policies would still involve some near-term pain.    

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