Economy in 2014:Apprehension over 2015 elections, crude oil price stifles optimism

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BY  BABAJIDE KOMOLAFE, PETER EGWUATU, NKIRU NNOROM, GODFREY BIVBERE,  FRANKLIN ALLI, ROSEMARY ONOUHA AND JONAH NWOKPOKU

Optimism of improved economic activities in 2014 among economic operators  is been  stifled by apprehension over political activities in preparation for the  2015 elections, as well as possibility of decline in crude oil price and the impact on government revenue, external reserves and exchange rate of the naira.

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In separate interviews by Financial Vanguard, operators across the various sectors said that they expect the economy to perform better in 2013. They however identify pre-election campaign activities as the greatest risk to the performance of the economy.

“The most important uncertainty of all is political uncertainty. Because we would face severe political challenges in 2014, it is obvious, we are going to have a national confab, and we are going to have an election.

Though the election will take place in 2015,  all the work will happen in 2014. So 2014 will be a year of political campaign and there would be more focus on policy than on governance”, said Opeyemi Agabaje of RTC Advisory Services Limited

The Lagos Chamber of Commerce and Industry also identified tension generated by pre-election activities as a threat to investors’ confidence and progress of the economy. President of the Chamber, Alhaji Remi Bello told Financial Vanguard, “The Chamber is concerned about the growing tension in the political space as pre- election activities gather momentum and heating up the polity.

We wish to stress that political stability is critical for the sustenance of investors’ confidence and the progress of the economy.  The omens in the outgoing year are not good enough and have created some discomfort among investors.”

Wale Abe, Executive Secretary, Financial Market Dealers Association of Nigeria (FMDA) on his part identified pre-election spending as a challenge to efforts to curb inflation. He said, “The challenges will actually come from curtailing inflation, given the fact that this year is a year preceding election, which means that electioneering campaign will actually start in 2014.

Given the fact that the ruling party is in a kind of crises and the opposition party, in terms of numeracy is increasing.  This might create some serious attrition between the ruling party and the opposition. It boils down to the fact that a lot of money will find its way into the economy, money that will not pass through the official banking industry, by way of corruption and others trying to get position to win election.

That might be the biggest challenge that we might likely face. Then if that happens, the expectation is that the interest rate will likely increase because the central bank will have to tighten more, in anticipation of fiscal injection into the economy.”

According to Haruna Kebira of APT Securities and Funds limited uncertainty over the outcome of the 2015 election could trigger withdrawal of funds from the capital by foreign investors and cause the stock market to shrink.

Victor Ogiemwonyin, Managing Director/Chief Executive of Partnership Investment Plc, however said that the risk associated with elections in Nigeria cannot be worse what was seen in the recent past and therefore, exaggerated.

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