Election results to lower investor risk perception for Nigeria

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Almost three decades after being ousted in a military coup, General Muhammadu Buhari is again Nigeria’s head of state. Only this time the new President was democratically voted into office in what was the most closely contested fully free and fair democratic election yet. Nigeria voted convincingly in favour of Buhari’s party, the All Progressives Congress (APC), with 15,424,921 of the votes for the APC and 12,853,162 votes for Goodluck Jonathan’s party, the People’s Democratic Party (PDP).

After 16 years in power, President Goodluck Jonathan urged his supporters to accept the electoral results by the Independent National Electoral Commission (INEC), which many believe is a sign of deepening democracy in the country. “I promised the country free and fair elections. I have kept my word. I have also expanded the space for Nigerians to participate in the democratic process. That is one legacy I will like to see endure,” he said in a statement released shortly after the results were announced. “Although some people have expressed mixed feelings about the results announced by the INEC, I urge those who may feel aggrieved to follow due process based on our constitution and our electoral laws, in seeking redress,” he said.

President Buhari’s previous 20-month tenure was infamous for its “war on indiscipline”, an approach that many say is necessary to fight the continuing rise of extremist group, Boko Haram, in Nigeria. His no-nonsense politics has however linked him with human rights violations in the past.

For the moment, however, the peaceful transition of power from the PDP to the APC has pleasantly surprised commenters. Paul Clark, Africa Equities Specialist at Ashburton Investments, says he did not expect the election to be “all plain sailing”. “We did however expect it to be the most well-run election held in the country since 1999, and the most closely contested.” Clark attributes this election’s success to a few key factors. New chip-technology containing voters’ biometric information and image was introduced to curb electoral fraud and the level of violence associated with previous Nigerian elections was all but absent, he says. “Calls from both the president and his challenger for a peaceful election were clearly heeded and security concerns in the north east of the country were brought under sufficient control for voting to happen there too.”

The political climate seems to be improving on the continent and is good for business sentiment which in turn encourages investment and the macro-economic situation. It bodes well for Nigeria, says Clark. “The country has matured politically and any risk perceptions that foreign investors may have will be lowered,” he says. “Over time this will reduce the cost of capital and the cost of doing business in Nigeria – which is very positive for a country that is busy diversifying itself away from an oil-based economy.” A sentiment Matt Robinson, Vice President and Senior Credit Officer at Moody’s, shares. President Buhari’s anti-corruption drive promises significant economic dividends for Africa’s largest economy and the improved security environment stemming from his likely increase in military spending would support economic growth and development, says Robinson. “Overall, this relatively peaceful transition is credit positive – it will likely put Nigeria on a more politically stable trajectory,” he says. “The stable transition in civilian rule, with its focus on improving domestic security conditions and on reforming the oil sector, is supportive in this regard, particularly vis-à-vis attracting foreign direct investment.”

There are still numerous challenges facing the newly elect when he is sworn into office 27 May 2015.

The decline in oil-price and the fiscal deficit which is expected to remain at 3 per cent are only some of the fiscal challenges, but government’s balance sheet remains strong, says Robinson. In a statement released by Coface, the international credit insurer’s economic and research department in France, Anne Sophie-Fevre lists corruption, ethnic, cultural, regional and religious divisions, and the above-mentioned fiscal challenges as Buhari’s key obstacles – the same obstacles faced by President Goodluck. The result has, however, renewed optimism. “Buhari seems to be slightly more socialist, his focus on reducing corruption and possibly reducing the size of the civil service could make the situation for consumers slightly worse rather than better in the near term. His policies should, however, improve the longer term outlook,” says Clark.