Illustration: KAREN MOOLMAN
Illustration: KAREN MOOLMAN

Jaded businesses and investors are approaching the 2019 election in Nigeria with a sense of trepidation due to a lack of clarity over what it means for the economy. The key questions revolve around who will win, what a change of leadership could mean, and whether the election will be the catalyst for economic growth or a continued period of under-performance.

The two candidates in question — incumbent President Muhammadu Buhari and former vice-president Atiku Abubaker — are both known entities, but their economic approaches differ markedly. Yet, despite these stark differences, the business community in Nigeria is curiously split on which candidate would be better for the economy.

Buhari swept to power in 2015 on a message of change, prioritising a security and anti-corruption agenda. However, economic performance under his tenure has been a disappointment, to say the least. Although there was nothing that could be done about the oil-price rout that started in late 2014 and drastically impacted Nigeria’s economic health, much of this malaise has been self-inflicted.

For one, Buhari took 166 days to appoint a cabinet. The resultant uncertainty squandered much of the goodwill of the political dividend and forced many foreign portfolio investors to sit on the sidelines while they awaited major appointments and clarity on policy direction. The president’s unilateral approach to the economic crisis didn’t help matters either, and the country soon found itself in a recession.

Investor perceptions of Nigeria were further damaged by the central bank’s management of the naira and the new administration’s lack of progress on economic reforms.

In addition, regulatory fines for foreign entities — as was recently highlighted with MTN — brought heightened attention to the overall risk of the operating environment in Nigeria. These own goals were regrettable, but wholly avoidable.

As Business Day columnist and Africa @ Work CEO Dianna Games observes, “despite efforts by the Buhari government to make it easier to do business, Nigeria has rather got a reputation for being heavy-handed with regulation [and for implementing ad hoc crackdowns on tax evasion and other structural problems], rather than putting in place sustainable policies and policing them properly. This has affected both foreign and local companies and had implications for perceptions of Nigeria as an investment destination”.

Buhari’s long absences have also raised questions about his health and his fitness for office. Although initially a major concern due to the uncertainty it created, investors have subsequently gained comfort from the careful manner in which the absences were managed (to avoid a power vacuum), the vice-president’s adept handling of the economy during these periods, and Nigeria’s historical precedent of adhering to constitutional succession in such situations.

Taken together, the past few years provide a clear template of Buhari’s economic philosophy and style of governance — defined by an ideological rather than pragmatic economic agenda — that has not deviated significantly from his presidential tenure in the late 1980s. The question now is whether a second term would be the same.

Atiku’s intention to make the Nigerian economy the focal point of his campaign was clearly evident following his election as PDP flagbearer. In an emotive address he rebuked Buhari’s dismal economic record and outlined key policy reforms he would pursue if elected — namely enhancing regional autonomy, stimulating economic diversification, scrapping the system of multiple exchange rates and increasing spending on education.

“Atiku’s nomination sets the stage for an election featuring two clearly distinct policy options,” says analyst John Ashbourne of Capital Economics. “Mr Abubakar has promised sweeping economic reforms, including a floating exchange rate and privatisation of the state oil company. He would also almost certainly appoint a new governor of the Central Bank of Nigeria, which could move the bank away from its current unconventional policy mix.”

A man walks past an election billboard at the Watt market roundabout in Calabar, Cross River state. Picture: REUTERS/INIOBONG SAMUEL
A man walks past an election billboard at the Watt market roundabout in Calabar, Cross River state. Picture: REUTERS/INIOBONG SAMUEL

However, the clearest indicator of Nigeria’s potential economic trajectory under Atiku’s stewardship was outlined in the launch of his highly ambitious election policy document. As per his blueprint for the Nigerian economy, Atiku intends to increase Nigeria’s GDP to $900bn by 2025. Interestingly, he also pledged that his government would offer the lowest corporate income tax rate in Africa — a move intended to make Nigeria the most attractive country on the continent for foreign investment.

While certainly striking all the right chords among the business community, Atiku’s policies have been described as aspirational at best and utopian by more realistic commentators. Less generous analysts have outright dismissed it as a work of fantasy. Indeed, there is a major disconnect between his stated aims and what is realistically possible.

Furthermore, in a country where the wheels of reform turn slowly, Atiku’s proposed economic agenda will be constrained by his pledge to only serve a single term in office. Attempts to renege on his one-term offer are unlikely to be accepted within the PDP’s executive structures and could lead to the same factionalism — and political floor crossing — that have hamstrung Buhari’s APC in the Nigerian legislature in the lead-up to the polls.

Moreover, Buhari will likely articulate Atiku’s laissez-faire economic framework as promoting the same unpredictable and opaque business environment for which Africa’s most populous state has gained a reputation. It is an accusation Atiku will find difficult to shake off amid perceptions that his considerable personal wealth was largely amassed through questionable dealings with foreign companies operating in Nigeria’s oil sector.

If Buhari’s position can be described as one of an economic nationalism, Atiku is clearly intent on offering its ideological antithesis. With ethnicity likely to be less of a differentiating factor than in the past (since both candidates are northern Muslims), this election is essentially framed as a choice between a pro-business candidate and pro-poor contender.

This sets the stage for an intriguing contest between two Nigerian political heavyweights.

But, what does all this mean for business in the country? Games observes that “companies are mostly just interested in getting the election over with, so they can assess the potential fallout and measure the risk going forward. Nigeria is generally considered a high-risk market but this has not put off savvy investors in the past — they find ways to manage it”.

This sentiment is reiterated by Nigerian economist Rafiq Raji, who noted that “the expectation of a close election is making people nervous. Although most have already taken precautions, they just want a smooth transition, whether to Buhari or from him to whoever wins”.

The elephant in the room, of course, is the price of oil. Should prices again flirt with 2014 lows, the country will find itself in deep trouble, regardless of who is in power.

Against this backdrop, the choice for investors is as follows: stick with the suboptimal status quo, or hang their hats on the hope of change, albeit with a recycled candidate?

Although some have been enthused by the rhetoric and market-friendly nature of Atiku’s proposals, is not clear how much of this lofty rhetoric will translate into reality. As a result, a number of businesses are unwilling to risk a leadership change given the inevitable disruption that will likely occur. With the post-election inertia that characterised Buhari’s ascent in 2015 still fresh in their minds, they have instead computed that the more pragmatic approach is to stick with the status quo, despite its obvious limitations.

Although Buhari’s unorthodox and haphazard economic approach has been uninspiring, erratic and sometimes damaging, there is a prevailing view that the second term cannot and will not be as bad as the first. Rather cynically, this is seen as the safety-first and “more certain” option — especially for investors who would rather minimise their downside than take a chance and be disappointed again.

• Gopaldas and Cummings are directors at Signal Risk, a pan African risk advisory firm. Gopaldas is also a fellow at GIBS.