Overview.The only thing that has been predictable about this year’s Presidential election in Nigeria has been that is unpredictable.As the nation waits to hear the final result there is an uneasy calm – but not the nice kind, more a calm before a storm. Already allegations of voting fraud are being heard. Regardless of who claims victory in the next 24 hours, the risk of protests and violence are very real should the ‘wrong’ person win. A runoff ballot cannot be ruled out until the final vote is counted and officially confirmed. Nigeria’s Central Bank is buckling under a self-inflicted cash crunch created by the launch of a new currency that everyone, from the beginning, knew would be poorly executed at best and total turmoil at worst. We predicted the latter and we are sorry to say we were right. Nigerians and their economy now need the new resident of Aso Rock to get to work. The country he will inherit is so badly broken it is almost beyond repair. Nigeria is on the brink on so many levels. It will take strong arms and dedication to fix it. Disappointingly, the two candidates currently leading in the race seem to possess neither the physical ability nor the work ethic. We are sure that Tinubu is currently writing his victory speech. What we don’t know yet is if he will get the opportunity to give it. Elections in Nigeria are never boring but this one should have come with popcorn – it could end up being a double feature.
Elections. At the time of writing, we have only provisional results of who the nation has picked to be its next President. The Independent National Electoral Commission (INEC) reports that more than 69% of ballots have been counted so technically right now the race is still too close to call. Results are already being disputed on all sides, however. The two main candidates are out in front. Bola Tinubu of the APC and Atiku Abubakar of the PDP are in 1st and 2nd place currently as expected but trailing them, spectacularly, is Peter Obi of the much smaller Labour Party. Obi has shaken up the system by taking some surprising wins including Tinubu’s home state of Lagos and also the Federal Capital Territory, Abuja. This has led to calls for results to be nullified. Opposition parties claim that despite winning many states that were previously APC strongholds they fail to understand how the PDP and Labour can be trailing so badly in the polls. So strongly is this being felt that despite winning in Katsina, Kebbi, Osun and others, also APC strongholds, the PDP are already calling for cancelation of the results. Labour Party Chairman has called the vote a “sham” saying “The election is irretrievably compromised and we have totally lost faith in the entire process”.Polling. The ballots were fraught with problems. Polling stations opened late in some areas and there were violent outbreaks in others. Election materials were delayed or in short supply. Persistent problems with the Bimodal Voters Accreditation System (BVAS) meant to accredit voters were reported. The INEC is also blaming BVAS for delays in uploading results. Some results were uploaded manually. This has created mistrust in the system. Even former President Olusegun Obasanjo is alleging that the INEC has been compromised resulting in manipulated and doctored results. The Amended Electoral Act 2022 mandates that election results be uploaded to a central server from polling units. Right now as we type, only results from 122,774 out of 176,846 polling units are available on the INEC’s IRev portal and not all of those have met the electoral act requirements. The European Union Election Observation Mission to Nigeria has issued a preliminary statement saying that the INEC’s lack of “transparency and operational failures reduced trust in the process and challenged the right to vote”.
Results. There is now a distinct possibility that we may see a runoff should the results of the current vote not be overturned. It is looking increasingly difficult for any candidate to get a majority. Also, Section 134 of the Federal Constitution states that candidates must win 25% of the vote in at least 24 of Nigeria’s 36 States plus the Federal Capital Territory to be declared the outright winner. We anticipate this clause will come into play. Currency. The Central Bank of Nigeria (CBN) replaced high value Naira notes on 15th December saying that old notes would cease to be legal tender after 31st January. This deadline was later pushed back to 10th February and then again to 10th April. This has created a currency crisis that has left already poor Nigerians fighting to find food and transport. There was major unrest right across the country as ATMs were emptied and banks closed their doors to preserve their cash deposits. Even the black marketers had no money to sell at times. Commuters reported problems paying road tolls due to lack of local currency and Point of Sale (POS) systems crashed as those who had cards tried a cashless strategy. Mobile banking apps too have stalled at times as servers struggle to stay online under the weight of heavy traffic. In short, it is chaos. There have been protests in major cities and we expect these to continue. Crowds have stormed banks and fights broke out as customers battled to use the few ATMs that were rumoured to be dispensing. At some branches, angry mobs destroyed teller machines and set buildings alight. Governor Nasir el-Rufai of Kaduna state has accused the CBN of withdrawing more than NGN 2 trillion in old notes from circulation but replacing them with only NGN 400 billion. The CBN has not responded, and that silence speaks volumes. The current Naira policy is paralysing small businesses and in turn is eating deeply into Nigeria’s economic stability. The redesign of the Naira had the potential to be a good policy as even the CBN admits they had lost track of more money than was in circulation – but the timing could not have been worse. The socio-political impact cannot be stressed enough. Mass discontent in an already extremely challenging economic and security environment has the potential to spark more protests. Immediate action must be taken by whomever is the next President to avoid a total economic meltdown.
Inflation. The cash crisis is fuelling the already out of control inflation fire. For example, the National Bureau of Statistics (NBS) reported that the price of bottled cooking gas has soared by 39% in the last year. The NBS also report that the indirect tax burden on Nigerians increased by 18.88% to NGN 3.03 trillion in 2022. Last year, Nigeria’s GDP grew by 3.40% but as 2022 ended inflation stood at 21.34%. These numbers have pushed an additional 5 million people into poverty bringing the total number of people classified in this category to 90 million. The current government had plans to increase taxes and in turn generate more revenue. Some areas discussed were adding further levies to alcohol, tobacco and sugar sweetened drinks. There can be no doubt that the Federal purse badly needs the funds, the ongoing recession is crippling the country on so many levels, but poverty is killing its people. In real terms, the minimum wage was valued at NGN 30,000 in 2019. By the end of 2022 it was worth just NGN 19,355. Something must be done urgently to stop the upward flow of inflation but until the political landscape becomes clear and we know who will be king, the economy will continue to spiral. What is not clear however is if a new captain can right the ship. A total economic crash has never been closer. The official bank rate is USD1 to NGN462. On the black market USD1 could buy NGN 760 on 28th February.
Watch List. The Financial Action Task Force (FATF), a global anti money laundering and terror financing watchdog has grey listed Nigeria. This new status will expose the country to increased scrutiny. With this in mind we anticipate a drop in international investment as financial institutions tick all the transparency boxes before any fund release or transfer. The FATF may see grey but global financial bodies will see black. Nigeria’s economy is already in poor shape and it is not strong enough to ride out many more economic shockwaves. The grey listing will spark an increase in the cost of doing business in Nigeria. On a financial front Nigeria’s reputation has never been a good one but this official classification now tears it to shreds. Experts say that it takes between 2 and 5 years to find and fix the deficiencies that have led to them being grey listed and having their status changed. We see no credible efforts anywhere on the table to say this will be a priority. More worrying is that right now the front runners to take the top spot don’t even seem to have it on their radar. Political gatherings and protests will continue in the near future as we wait for the final election results. The UK government has updated its travel advice warning of the risk of violent demonstrations, and the US Embassy has issued similar. There is currently a very real risk of unrest, not least if a re-run does happen. Election seasons in Nigeria are never dull but this one has been exceptional even as we wait to hear who won. Corruption always comes into play at these times, and we feel Nigeria’s current cash crisis is a very visible result of it. The Central Bank know that there was NGN 2.34 trillion in circulation but they only had eyes on NGN 1.36 trillion of it. That is a lot of cash that needed to be ‘washed’. Elections are often won by the highest bidder and in Nigeria – cash is king. Large quantities of the billions of unaccounted for Naira would have been earmarked to buy votes, lose votes and generally disrupt the entire process. There is much talk that what little of the new currency was minted was immediately snapped up by people in power. We are inclined to believe these rumours. 95% of all money in Nigeria is held by only 5% of the population. Nigeria is, and always will be, a ‘let them eat cake’ kind of country. As we close this report, Tinubu leads the vote but he may not have won the war. Tinubu has for years been the kingmaker in Nigerian politics, but this election has thrown a spanner in the works and that spanner’s name is Peter Obi. Obi did not have the huge financial backing that the APC and PDP can command. Nor do we see any of the usual signs of him being propped up financially by those out to gain from political appointments and lucrative legislation. Obi is as he always was – his own man. He has engaged the youth of Nigeria. At only 61 years of age, he is seen as being a fresh face on the political scene which for decades has been dominated by an army of old men. Obi has energised voters and made them think that a new way of governing could actually be possible. Right now he has split the vote and that is impressive. The significance of where he has won votes should not be ignored. If by some last minute surprise he does end up victorious it could be a bright political dawn for the nation. If he loses it will be a dark day for his supporters but leaves the door open for Obi, and others like him, to try again in 4 years. We will see tomorrow which political party players have a hangover but as it stands the biggest losers will be the Nigerian people unless an extreme swing or Supreme Court challenge can throw yet more sticks in the spokes.