- Title: NIGERIA/FILE: Pre-electoral feuding threatens Nigeria's economy
- Date: 28th October 2013
- Summary: LAGOS, NIGERIA (FILE) (REUTERS) EXTERIOR OF NIGERIA STOCK EXCHANGE BUILDING VARIOUS OF DEALERS ON EXCHANGE FLOOR
- Embargoed: 12th November 2013 12:00
- Keywords:
- Location: Nigeria
- Country: Nigeria
- Topics: Economy,Politics
- Reuters ID: LVA776HJYE5I4B68AF5LR7QHYKKT
- Story Text: In Nigeria, as elsewhere, foreign exchange markets can be a barometer of internal strife, so when central bank governor Lamido Sanusi noticed a surge in dollar demand at forex bureaux in July, he feared something was amiss.
The bank found tens of billions of naira were traded for dollars in cash, much more than importers needed to buy goods or investors to repatriate funds, and there was no trace of where the money came from or where it was going.
The prime suspects, he says, are politicians jockeying for position ahead of what look likely to be bitterly divisive 2015 polls in Africa's second-biggest economy.
He blames "dollarisation of the economy by political elites" for continued weakness of the naira, despite central bank moves to prop it up with dollar sales that have depleted its reserves to an eight-month low.
Some economists dispute that explanation of the currency's troubles, but it highlights the economic risks of Nigeria's costly and often violent pre-electoral politics.
Nigeria's growth rate of more than 6.5 percent and its huge consumer market are a draw for foreign investors, but they worry about stability and the country's tendency to squander its windfall as Africa's biggest oil producer.
Kayode Akindele, partner at Lagos based advisory firm, 46-parallels says it is still early for politicians to be jostling for the 2015 elections.
"I think it's interesting, we have seen recently, in the last few years a move towards dollarisation especially because it is easier to carry large amounts of money in dollars than in local currency. The elections are not for two years so it'll be a bit early for politicians to be moving those kind of sums of money around unless, we have some elections in Anambra, some of the states coming up in the next few months, unless it's for that but I think in terms of the general elections in 2015, it's a bit early," he said.
A feud is bubbling between President Goodluck Jonathan and rivals in his ruling People's Democratic Party (PDP) over his assumed intention to run for another term, which is distracting from vital economic reforms.
Seven ruling party governors and a former presidential candidate have formed a PDP splinter group determined to stop Jonathan from running again, though he recently declined to say whether he would.
All but one are northerners who feel another spell in office would break an unwritten rule that the presidency should rotate between north and south every two terms, or are disappointed with his record on tackling security challenges like an Islamist insurgency in the north.
The president last month sacked nine ministers he suspected of disloyalty.
Nigerian elections always cost the country billions of dollars and, often, many hundreds of lives, especially when they ignite ethnic rivalries or regional tensions between the largely Muslim north and mostly Christian south.
Thanks largely to the feud, unofficial campaigning has begun almost two years early, so politicians will need to sustain spending on patronage for longer.
Such spending can come from politicians' private interests, but there are other ways, including state money for projects that benefit constituents, and government contracts for allies.
There is also widespread concern that some politicians profit from criminal gangs that make money from kidnapping, extortion or the theft of oil from the Niger Delta.
Idris Jibrin, director, Centre for Democracy and Development, says the crisis in the PDP runs deep, and he does not see them resolving these issues.
"Well, there is a very strong belief within the northern political class that they did not have their turn when President Umoru Yar'Adua came back to power and unfortunately he died not long after coming into power. The northern political class feel therefore they need to get their full term having ceded power to the south in 1999. This is part of the crisis that led to the split within the ruling party between what is now called the new PDP which is fighting the PDP of president Goodluck Jonathan ... this split therefore is very much part of the contest over zoning of political power in the country," the director said.
It may not be such a bad thing for democracy, he says, if the dominant PDPup breaking up into two or three parties.
But it would damage public finances if state money is used to shore up wavering loyalties, and all three tiers of government; local, state and federal will need to fight expensive battles.
"My belief is that this serious split within the ruling PDP may be good fortune for Nigerian democracy even if it is bad fortune for the party. I think it could be good fortune because it will create the basis in which political parties themselves would begin to develop and would not be under the command of somebody simply because that person is president. It also means political parties will begin to take more seriously, considerations of what membership thinks because ruling parties will no longer be guaranteed perpetual power," Idris said.
Nigeria's cash position always plummets ahead of election time, but this time oil theft is proving an unprecedented drain, dragging official output to a four-year low, nearly a fifth below its 2.5 million barrels per day (bpd) capacity.
Rampant theft has also left the government with less money, despite high oil prices, just when governors and legislators are clamouring for it.
A bill to reform the oil industry, which feeds 80 percent of government revenue, is stuck in parliament and unlikely to pass before the elections. - Copyright Holder: FILE REUTERS (CAN SELL)
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