Nigerian President Goodluck Jonathan’s decisive victory in ruling party primaries makes him clear front-runner for April polls, but local election battles will be more closely fought, raising the prospect of further unrest.
Jonathan’s solid win at the People’s Democratic Party (PDP) primaries suggests deals have been done with some opponents from the Muslim north and reduces the chance of a presidential campaign polarised around regional rivalries.
There has already been election-related violence at in parts of the oil-producing Niger Delta, the “Middle Belt” at the crossroads of the mostly Muslim north and largely Christian south, and in the remote northeastern state of Borno.
Localised violence has been a feature of all Nigerian elections and, on their own, these outbreaks do not risk derailing the presidential or parliamentary polls.
But they are likely to be a persistent headache for Jonathan’s administration as campaigning gets underway.
Government spending is likely to continue to rise ahead of the polls, putting pressure on foreign reserves and weighing against efforts to drag inflation into single digits.
Policy initiatives such as the Petroleum Industry Bill, a wide-ranging overhaul of the mainstay oil sector, are unlikely to pass before voting day and while there is investor interest in the planned privatisation of the power sector, deals are unlikely to be sealed until the political picture is clearer.
The outlook for the capital markets is rosier. Nigeria successfully launched a debut $500 million Eurobond in January as investors shrugged off near-term risk and the banking sector is emerging from crisis, fuelling gains on the stock market.
ELECTIONS
Jonathan’s victory at the primaries makes him the favourite to win the April 9 presidential election as the PDP has won every poll since military rule ended in 1999.
His defeated main PDP rival, former Vice President Atiku Abubakar, initially questioned the conduct of the primary but has since said he will not go to court to challenge the outcome.
His main opposition challenger is likely to be Muhammadu Buhari, running on the Congress for Progressive Change (CPC) platform, a former military ruler who is hoping to capitalise on opposition to Jonathan from the Muslim north.
Jonathan’s candidacy is controversial because it interrupts a pact within the PDP that power should rotate between north and south every two terms. Some in the party and in the opposition say only a northerner should be president this time around.
Ibrahim Shekarau, governor of the northern state of Kano, and former anti-corruption chief Nuhu Ribadu are also running in the presidential race, although they are relative political lightweights and their chances of success are seen as limited.
Local elections are more likely to cause instability.
Flashpoints include Bayelsa state in the Niger Delta, where a bitter rivalry between state governorship candidates Timi Alaibe, a former presidential adviser, and incumbent Timipre Sylva has already triggered violence.
More than 200 people have died in ethnic and religious clashes in Plateau state in the central Middle Belt over the past month, according to U.S.-based Human Rights Watch, violence which is likely to intensify ahead of the polls.
And in the remote northeast, a wave of killings of police and local leaders by militant Islamist sect Boko Haram has increasingly targeted election officials. One of Borno state’s main governorship candidates was gunned down.
The Independent National Electoral Commission (INEC) has pledged that voter lists, at least, will be better than in the past but has admitted there have already been attempts to sabotage the process.
What to watch:
— Clear and public endorsement of Jonathan by northern rivals including Abubakar would smooth his way to victory
— Legal challenges against Jonathan or against the electoral process could undermine his authority
— Risk of violence spreading to other parts of the north from the central Middle Belt and northeastern Borno state
POLICY AND SPENDING
Government spending has been rising in the run-up to elections. Government borrowing had increased around 50 percent by late 2010, dwarfing private sector credit growth of just 3 percent in the year.
Foreign exchange reserves fell almost a quarter year-on-year by December.
The excess crude account, into which Nigeria saves windfall oil income, has dropped to $300 million from $20 billion at the start of the presidential term in 2007.
Jonathan presented a 4.2 trillion naira ($28 bln) 2011 budget proposal to parliament in December, an 18 percent cut in approved spending for last year but recurrent spending — the cost of running government — remains high in the plans.
Fitch said in January a negative outlook on its rating of Nigeria and its Eurobond reflected concerns about oil savings depletion despite a rise in output and oil prices.
The political uncertainty also means major pieces of policy — and the multi-billion dollar investment decisions that hinge on them — are likely to be on hold until after the elections.
Arguably the biggest is the Petroleum Industry Bill, which will re-write Nigeria’s decades-old relationship with foreign oil firms and redefine the fiscal and legal framework governing investment, including in its key offshore fields, expected to yield most of its future production growth.
Failure to pass the bill ahead of the elections could mean it has to return to a first reading before a new parliament, potentially setting it back by months or years.
Until it passes, foreign oil firms will keep multi-billion dollar investments on hold. The projects have timeframes of several years, meaning lack of investment now could see Nigeria’s oil output stagnate 5-8 years down the line.
Potential investors in the planned privatisation of the domestic power sector, one of the cornerstones of President Jonathan’s policy, are also unlikely to go beyond statements of interest until the elections are over.
Banking reforms continue apace and the 5-year tenure of Central Bank Governor Lamido Sanusi means even a change in president is unlikely to derail them. But credit flows have yet to return, limiting growth in the real economy.
What to watch:
— Further depletion of foreign exchange reserves
— Passage, or not, of oil reforms before elections
NATIONAL SECURITY
Those responsible for a bomb in Abuja on New Year’s Eve have still not been identified and there is concern that there could be further such attacks in the run-up to elections if, as widely assumed, the bomb was meant to discredit Jonathan.
Violence has continued in the Middle Belt around Jos and there is growing frustration among parts of the local population about the role of the military, deemed to be partisan in its approach to ensuring security.
The tension is rooted in decades of resentment between indigenous groups, mostly Christian or animist, who are vying for control of fertile farmlands and for economic and political power with migrants and settlers from the Muslim north.
Should the situation continue to deteriorate, Jonathan may have to deploy additional troops or declare a state of emergency, further stretching the security forces around election time.
Some observers say he may also have to declare an emergency to curb violence around the northeastern city of Maiduguri, where radical Islamist sect Boko Haram has threatened to continue attacks on the local government and security forces.
Jonathan in January named an anti-terrorism co-ordinator and a new adviser for the Niger Delta, a sign he is seeking to tackle national security concerns head on.
There have been several kidnappings at sea off the coast of the Niger Delta, but largely the recent violence has been centred around local elections rather than targeting the oil and gas industry, a picture seen as unlikely to change for now.
What to watch:
— More bombs strikes on civilian areas
— States of emergency declared in regional flashpoints