Wednesday, February 11, 2015 10.23 AM / Investment One
Over the weekend, Prof Attahiru Jega, Chairman of the Independent National Electoral Commission (INEC) announced the postponement of the presidential and governorship elections scheduled for Feb 14th and 28th respectively. The new dates for the elections were set as Mar 28th and Apr 11th.
The decision to delay the elections was on the grounds of the army’s inability to provide protection during the elections. As its efforts are currently being directed at its ongoing offensive operations against the insurgents in the north. We note that this comes a few days after the service chiefs had assured their readiness for the elections.
This did not entirely come as a surprise as there had been speculations about the possible suspension of the elections due to issues relating to the distribution and collection of Permanent Voters Cards (PVC).
Earlier, INEC assured Nigerians of her readiness and that it intends to distribute PVCs even till the eve of the initial proposed date. The issue of non-preparedness of the security operatives and the need to push the insurgency is a new variable and it is now being viewed with distrust.
We believe this could send negative signals that might lead to deterioration in Nigeria’s political outlook. We do not expect a further postponement given its constitutional implication.
There are enough concerns on the macroeconomic front in addition to the violent insurgency in the North.
We reiterate that the electioneering process remains a distraction to policy traction. As such we see a further downward revision on 2015 growth output on the back of the postponement.
In opinion the postponement will further add to the risk premium on Nigerian asset class.
Over the last two days, the USDNGN has touched its lowest level at N199/$; about 18% up from the N168/$ midpoint. In our opinion, this is not unconnected to the new political realities.
We had expected that the CBN will weather the growing pressure on the Naira post-election. However, the postponement might see policy response during the forthcoming MPC meeting. The growing pressure on the FX reserves informs our view.
Further depreciation would lead to inflationary pressure given Nigeria’s strong appetite for imported goods and services.