Change and No Change

A comfortable majority of Nigerians voted for ‘change’ on March 28, 2015, electing the opposition All Progressives Congress (APC) candidate, General Muhammadu Buhari on his fourth attempt. Buhari had contested the position four times consecutively-2003 and 2007 on the platform of the now defunct All Nigeria Peoples Party (ANPP), in 2011 through his Congress for Progressive Change (CPC) before the merger that produced the APC.

Everyone-Nigerians, investors, the international community-all expected my fourth scenario, crises, one way or the other. I felt the palpable tension and anxiety on Lagos Island on the afternoon of March 31st as banks abruptly shut their branches, traders fled the Island, and the air felt chilly and cold as everyone expected trouble either as the incumbent, Goodluck Jonathan and his entourage were expected to resist an INEC announcement of his defeat or as an INEC announcement that Jonathan had won contrary to the trend of results was expected to spark violence.

In the event, there was great relief and later euphoria as Jonathan called his opponent to concede defeat and Nigeria recorded its first and unprecedented opposition victory over an incumbent president and Buhari became President-elect.

Foreign currency and capital markets immediately rallied as a result of the de-escalation of political risk! Our scenario analysis had, of course, anticipated this eventuality! We noted that there was a significant political risk discount in capital market valuations (in addition to fundamental economic factors) and some element of market rallying was possible if elections were resolved peacefully.

We also noted the large scale dollar conversion many Nigerians were undertaking to hedge their savings and transactions against political risk. With the easing of political risk, investor euphoria took over and BDC and parallel market FX rates fell from around N224/$ by election day to around N203/$ before rising again to around N207/$.Similarly capital markets rallied until investors began to take profits and the rally stalled, affirming the fact that fundamentals will prevail after political risk discounts are eliminated.

Those key fundamentals have little to do with Goodluck Jonathan! Low oil prices and the impact on an economy structurally dependent on crude oil sales for its exports, reserves, exchange rate, budgets and to some extent, domestic consumption; the resultant fiscal imbalance and the imperative of a fiscal strategy and adjustments that takes Nigeria successfully through this period of low revenues and delivers a diversified export and government revenue base; the prevailing social crises of poverty, unemployment and/or underemployment, illiteracy and/or poor quality education, crime and insecurity and insurgency; and weaker economic and corporate performance (reduced GDP growth projections, tighter financial sector conditions, tougher business operating environment, reduced corporate earnings growth etc.) as a result of weaker demand and purchasing power.

So far, the main downside risk of the ‘change’ scenario (crises in the Niger-Delta!) is yet to manifest but the new governing elite may remain vigilant and proactive on that score. Other risks in this scenario-preserving the winning coalition and cohesion, preventing excess fiscal and monetary expansion and possible inflation as the government moves to fulfill its campaign promises, and popular disillusion at predictable delays and difficulties in meeting huge expectations for ‘change’ and social welfare, remain. The immediate policy issues and imperatives for Buhari and his team will be composition of President-elect Buhari’s inner circle, economic team and cabinet and preserving the winning coalition; determining his policy posture in relation to power sector privatisation, agricultural reforms, NSIA, transportation infrastructure projects, and other major ongoing policy initiatives; design strategies for prosecuting the promised anti-corruption effort; proactively managing possible disaffection in the Niger-Delta; snuffing-out and cleaning out the ‘Boko Haram’ insurgency and addressing its root causes; and designing and implementing policies to resolve national crises of poverty, unemployment, education and skills.

With the conclusion of the state Governorship and House of Assembly elections last April 11, the APC now dominates the Presidency and National Assembly (Senate and House of Representatives) at the federal level and most of the state governments. APC is dominant in the South-West (four states, Lagos, Ogun, Oyo and Osun, out of six), North-West, North-East and North-Central while the PDP is now essentially a South-South/South-East party. The PDP will have to ponder its future as our prediction of a defacto coalition due to large scale defection from the party is realised.

In Lagos State, voters appeared to have rejected my advice to embrace ‘Change in Lagos’ and opted for continuity with the suzerainty of Asiwaju Bola Ahmed Tinubu under new Governor-elect, Akinwunmi Ambode. In the event, two factors may have proved decisive-the ease with which the APC could attack Jimi Agbaje on the basis of the PDP brand association (which has proved to be very toxic in Lagos State) and the unfortunate characterization of Jimi Agbaje as an Igbo candidate, which turned most Yoruba voters against his candidacy and the concomitant intimidation of his non-Yoruba supporters.

I know Jimi Agbaje and I know he pitched his candidacy equally to all segments of the Lagos population just like his opponent. Indeed, the only billboards and posters of a candidate dressed in Igbo attire are those of Ambode and there is absolutely no statement verifiably attributed to Jimi Agbaje that defines him as anything but a proud Yoruba indigene of Lagos State. I am proud of the effort Jimi Agbaje put into this campaign and I have no doubt that history will vindicate him.