Political Risks To Persist Ahead Of 2015 Elections

BM I View: Nigeria is facing several challenges in the lead-up to the 2015 election, any one of which could pose a threat to broad political stability and economic development. However, we believe that the country will be able to navigate these issues and avoid disaster. Nonetheless, we note that reform of the political system will be crucial if the country is reduce its susceptibility to these kinds of risks.

Nigeria's perennially volatile political environment is facing a particularly challenging period that will last at least until general elections scheduled to take place in February 2015. Although the risks of significant, economy-derailing upheaval are arguably higher now than have been for several years, we believe that the country will navigate this period without succumbing to a major political crisis. However, Nigeria will remain susceptible to risks until there is structural reform to the political system. In this regard, the ongoing national conference, which has brought together a range of stakeholders tasked with coming up with recommendations for what changes might be made, will be important to the country's long-term political stability.

Challenges On Several Fronts

Social Stability And Characteristics Of Polity Pose Biggest Short And Long-Term Risks Respectively
Nigeria - Components of BMI's Short-Term (LHS) And Long-Term (RHS) Political Risk Ratings

Political Risks To Persist Ahead Of 2015 Elections

BM I View: Nigeria is facing several challenges in the lead-up to the 2015 election, any one of which could pose a threat to broad political stability and economic development. However, we believe that the country will be able to navigate these issues and avoid disaster. Nonetheless, we note that reform of the political system will be crucial if the country is reduce its susceptibility to these kinds of risks.

Nigeria's perennially volatile political environment is facing a particularly challenging period that will last at least until general elections scheduled to take place in February 2015. Although the risks of significant, economy-derailing upheaval are arguably higher now than have been for several years, we believe that the country will navigate this period without succumbing to a major political crisis. However, Nigeria will remain susceptible to risks until there is structural reform to the political system. In this regard, the ongoing national conference, which has brought together a range of stakeholders tasked with coming up with recommendations for what changes might be made, will be important to the country's long-term political stability.

Social Stability And Characteristics Of Polity Pose Biggest Short And Long-Term Risks Respectively
Nigeria - Components of BMI's Short-Term (LHS) And Long-Term (RHS) Political Risk Ratings

Challenges On Several Fronts

The approach of elections has a tendency to raise the political temperature and the lead-up to the 2015 poll will be particularly contentious owing to disputes over presidential candidacy in both of the country's main parties. The ruling People's Democratic Party (PDP) was rocked by infighting and a spate of defections in late 2013 and early 2014. At the heart of tensions in the party was a struggle for control ahead of the 2015 vote. Most of the defectors were northern politicians unhappy with President Goodluck Jonathan's assumed intention to take the presidential ticket. Jonathan, a southerner, served the final year of late President Umaru Yar'Adua's term following his death in 2010 and was then elected in 2011. Many northerners believe that in order to honour an unwritten agreement to rotate the presidency between the north and south, a northerner should take the PDP ticket in 2015.

Although the PDP appears to have stabilised its support base without suffering too much damage, the issue of defections remains a source of uncertainty for political stability. Thiry-seven members of parliament who left the ruling party to join the opposition All Progressives Congress in early 2014 are challenging a court decision to declare their seats vacant and have said that they will not vacate their seats, This will potentially setting the opposition on a collision course with the judiciary.

The arrival of the ex-PDP lawmakers at the APC potentially makes the opposition party the dominant force in the lower house of parliament (the actual make-up of parliament is uncertain due to the court case alluded to above and the fact that there have been defections in the opposite direction). However, the PDP's losses cannot necessarily be counted as the APC's gain. Rather than being ideologically or policy-driven, the basis for the alliance was and is opposition to the PDP. The party was formed in February 2013 when Nigeria's four biggest opposition parties came together under a single banner. This diverse origin has made policy formation and candidate selection hazy and contentious.

The inclusion of the ex-PDP governors and lawmakers, whose reasons for joining the APC are also largely based on what they oppose rather than what they support, will further complicate the opposition party's internal politics. The APC is scheduled to hold a national convention on May 24 with local party congresses set to take place over the course of April, and much will depend on the party's ability to present a united front after these meetings.

Corruption And Oil Sector Woes

Added to intra- and inter- party tensions, several other issues will contribute to uncertainty as the 2015 elections approach. Central Bank of Nigeria Governor Sanusi Lamido Sanusi was suspended by the president shortly after he alleged that a significant amount of oil revenue is unaccounted for. Although we think that the removal of the highly-regarded Sanusi will not materially alter the country's macroeconomic profile, we think that his departure reinforces the fact that corruption remains a major problem. Jonathan has been criticised for not doing enough to combat the issue and this could lead to a popular backlash. Additionally, low levels of export inflows mean that reserves and the currency have come under a pressure. This could result in higher inflation, which would pose a threat to economic growth and political stability.

Finally, the insurgency being carried out by militant group Boko Haram shows no signs of abating and this will remain a major challenge in the lead-up to the vote and, more than likely, after the election as well.

Escape From Risk Will Depend On Restructuring

Although political risk will remain elevated due to these issues, we believe that Nigeria will manage to navigate them and we do not expect a major political shock. However, we note that the country will remain susceptible to these types of risks until there is reform of the political system. The president appears cognisant of this and has set up a three month national conference, which began in mid-March, during which a committee will collate views of Nigerians from all backgrounds. These views will then be transformed by the committee into recommendations about what needs to change in order to improve the country's political short-comings. Consensus appears to be that devolution of power away from the centre is key to achieving a more sustainable political system. Given the vast array of interests, reform will be difficult to achieve, but it will be crucial to Nigeria's long-term stability. The findings of the conference committee due to be published following the end of the conference in June will be a first indication as to whether such reform is possible, let alone likely.

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