Everything’s up in the air as businesses await elections
At t his t i me of year, t he warm, harmattan wind is s weeping ac r os s West Africa, leaving cities dusty and their residents choking. Nigeria is as breathless as anywhere. The weather here seems to be an adequate metaphor for the mood in Africa’s largest economy in the weeks before its presidential election: choked. Not by t he usual i ntr i cacies a nd complications of Nigerian business, but instead by an unusual lack of activity.
Processes that usually take days have slowed to weeks, processes that usually take weeks have slowed to months. Processes that usually take months... Forget about it.
This stasis is affecting all areas of life; friends and contacts in sectors as diverse as textiles, oil services and infrastructure all report the same. There’s no business to be done, so they’re not doing it. Instead some are on holiday, others sit ting bored in off ices waiting for the phone to ring again. Transaction tonnages are dropping, cargoes are modest, counterparties aren’t biting.
Nervousness around the election accounts for the lion’s share of the reason why, especially after the originally slated 14 February date was pushed to 28 March, ostensibly due to security concerns relating to the Boko Haram insurgency in Nigeria’s northeast.
As t he t ightest poll i n Nigeria’s complex and t urbulent democratic histor y, it ’s hard to make business decisions when, in a few short weeks, the country could be under incumbent Goodluck J onat ha n or Genera l Muhammadu Buhari. Or neither, given mutterings about the possibility of an interim government.
Regardless of t he outcome, t he aftermath of the election will not be straightforward and is likely to bring with it social unrest and concerns over legitimacy of the result. None of these are conducive to creating the business conditions that most investors want when they have cash looking for a home.
Then there’s the naira, which has dropped 10% against the rand and 18.6% against the US dollar in the last six months.
Sliding prices of biggest national export crude oil, fears over security and the election uncertainty have hit the naira hard, while diff iculties getting hold of US dollars have t urned the foreign exchange thumbscrews further on international companies operating in Nigeria.
The g r eenback s queeze comes after t he Central Bank of Nigeria sold billions of dollars in reserves to support the naira against deteriorating s ent i ment t owards t he countr y ’s previously f lourishing economy. The bank stopped these dollar auctions last month in a bid to maintain reserves, and in doing so cut off a crucial source of dollars to commercial banks.
It’s often said to investors going into Nigeria that patience is the greatest virtue. For now and for who knows how much longer, that patience is more important than ever.
Left: General Muhammadu Burhari Right: Goodluck Jonathan