Analysis by experts has shown that the Nigerian economy stands to lose N1.6 trillion as a result of the shutdown of economic activities for three days, including the last Saturday which was originally scheduled for the presidential and House of Assembly elections
The Director General of Lagos Chambers of Commerce and Industry (LCCI), Muda Yusuf, said the country is about to lose about $1.5 billion, due to the postponement of the 2019 general elections.
He said: “We shut down the economy for a whole day, that means the different outputs of the economy for a whole day are practically gone. We are talking about within the range of $1.5 billion. Now even before today, because of the election, the tempo of the economic activities had gone down.”
Explaining the rationale behind the figure, Prof Uche Uwaleke, Nigeria’s first professor of capital market and Head of Banking and Finance department, Nasarawa State University said: “If you pin the GPD at $510 billion dollars and you divide that by a day’s output, that will give $1.5 billion dollars.”
Using the prevailing exchange rate for the Import and Export window which is at N360/$, the three days that would be affected by the election would see the economy lose N10.6 trillion, which is N540 billion daily.
Prof Uwaleke said: “The postponement of the general elections by INEC has monumental adverse economic impact not only on the government but also on firms and individuals. This cost is escalated by the fact that the announcement came on the very day the elections were to be held after a number of irreversible steps had been taken by various economic agents and actors.
“Many people had traveled far distances just to exercise their franchise before the INEC decision while many organizations, especially educational institutions had to shut down temporarily for the period of the elections. The associated costs of doing so cannot be quantified. Just how do you measure the huge losses on the part of individuals from cancelled wedding, burial and other ceremonies already scheduled for Feb 23 and March 9 – the new dates picked for the elections? How about production plans by business firms already made with the original elections dates in mind that will now be shattered? What about the disruptions in domestic and international flight arrangements? One could go on and on.”
In his argument, he said because the announcement wasn’t made early enough, business activities will be very low on Feb 16. A number of markets and businesses will be shut for most part of the day. The reopening of land borders eventually will be after the closure announced earlier had taken its toll on the economic activities of border communities.
The cost to the political parties and election observers can better be imagined. Some of the parties may not have the resources to foot the extra bill given that their agents had already been mobilized. Ditto for election observers, especially international observers, some of whom may have to return before March 9 due to unanticipated hotel and other bills.”
Prof Uwaleke said the unfortunate development further confirms what is public knowledge that the huge cost of conducting elections in Nigeria is about the highest in the world, even surpassing that of India, the world’s largest democracy with a population six times bigger than Nigeria’s.
Recall that the sum of N189 billion was approved for INEC for the 2019 elections. This amount is more than the capital components of education and health budgets put together. If you consider the total sum of N242 billion approved for INEC and five other agencies for the conduct of the 2019 general polls, it is money that could have gone a long way in fixing critical infrastructure in the country.
“With elections now rescheduled, you can be sure that this cost will spike. Where will this extra sum be sourced from if not from money already earmarked for capital projects? So the opportunity cost is quite high. This development could widen the fiscal deficit and I hope it doesn’t amount to additional borrowing by the government. It also raises country risk for Nigeria. Any attempt to borrow externally will be at a higher cost,” he added.
He further posited that the information-sensitive stock market will be at the receiving end with expected bearish trend in the days ahead following this development.
“There is no doubt that this will have the effect of weakening investors’ sentiments and may even trigger further capital flight. I won’t be surprised if this first quarter of the year is characterized by lower capital importation and slower GDP growth.
“In the same vein, the Purchasing Managers Index reading for the month of February 2019 is bound to come in lower when compared to previous months,” he said.
Uwaleke is of the view that, the postponement of the elections due to ‘logistic reasons’ was avoidable and does not bode well for the nation’s economy. Going forward, “in view of the huge cost of conducting elections in Nigeria and considering that elections were postponed in 2011 and again in 2015 and then now, isn’t it time we reconsidered the frequency of elections in Nigeria by amending the constitution to provide for a single term of say 5 or 6 years as opposed to the two terms of 4 years?”
Daily Trust in this report further looks at the sectors that took the biggest hit, following the announcement.
The transport subsector is one of the biggest hit as movement was completely restricted during this period.
The GDP from transport in Nigeria increased to N277.3million in the fourth quarter of 2018 from 221,416.44 NGN millions in the third quarter of 2018.
The data shows how significant this sector is to the economy, especially when one considers what is lost in terms of tax in the aviation sector of the economy.
No social ceremonies of any kind will take place during the elections. Consequently, billions of naira will be lost as there will be no jobs or money for event centres, event planners, event vendors, musicians and masters of ceremony.
Prof. Okoli Fidelis Chukwuma highlights, in an international peer review journal in 2014, that events are the current trend in the hospitality industry.
Apparently, these events have taken the shape of flamboyant weddings, concerts, fashion shows, corporate events and even small private gatherings.
Pegged at $20 billion, the events industry in Nigeria is estimated to be among the most extravagant in the world. Even more revealing is the fact that venue rentals take up about 5% of event costs.