THE Nigeria economy is under serious threat, courtesy of the uncertainty unleashed by election fever. The political class has further complicated the already tensed atmosphere with unguarded utterances that scare away investors.
In this feature, ENCOMIUM Weekly reveals alarming negative economic trends traceable to the fierce battle for the soul of Nigeria.
NAIRA IN A FREE FALL
-May exchange for N220 to $1
Many economic factors, including politics are working against the naira. From a fairly stable exchange rate of N161 late last year, the naira has since crossed the N200 to $1 exchange benchmark earlier predicted by economic experts.
As at Monday, February 16, 2015, the naira exchanged for N210 at the parallel market. There are fears it night hit the all-time high N220 in a matter of weeks!
The high-wire politics which has largely impacted the economy has not helped Nigeria’s weak currency which has already been devalued. There are also allegations that politicians have abandoned the naira for foreign currencies, especially the US dollar. The high demand for the dollar, financial experts say, is giving serious pressure to the naira threatened by drastic fall in the price of oil, Nigeria’s major source of foreign exchange.
The foreign reserves that protect the naira have also seriously depleted.
CAPITAL MARKET LOSES N5 TRILLION
The struggle for power is also killing the stock market. A market prone to shocks, Nigerian shares are no longer the preferred choice of local and foreign investors who are apprehensive of the future.
The Nigerian capital market has reportedly shaded off over three trillion in the last few weeks as investor apathy escalates. In fact, about five trillion naira has been lost, so far.
“Afraid of tomorrow, many are selling their shares. The bears have taken over the market. And stocks have lost their value,” Clement Elendu, a stockbroker told ENCOMIUM Weekly.
INVESTORS’ PANIC THREATENS ECONOMY
Generally, investors are now afraid to do business in Nigeria. The reason is not far-fetched. They do not know what the outcome of the 2015 general elections portends for the nation vis-à-vis their economic interests.
Business proposals and ongoing projects have been suspended because of possible policy shifts, should there be a regime change.
Some even fear Nigeria might disintegrate after the March 28 and April 11, 2015 polls.
CAPACITY UTILISATION DECLINING
Another negative effect of politics on the economy is the declining capacity utilization.
According to the latest review of the Manufacturers Association of Nigeria (MAN), productivity is declining as entrepreneurs are largely abandoning economic activities for politics.
All funds are now channeled to campaign to the detriment of the business sector.
Even those willing to produce are faced with harsh operational encumbrances occasioned by the dwindling fortunes of the Nigerian economy.
“The business climate is not really favourable. All the funds are going to politics. So many people are just waiting for the elections,” Sir Daniel Uchendu, Chairman/CEO, Danduko Group told ENCOMIUM Weekly.
“It’s not unusual because an election year always hurts business if not properly managed. But there is no cause for alarm, in my opinion because the economy will pick up after the general elections,” an investment analyst and CEO, Blue Chips added.
BUSINESS PEOPLE FLEEING FOR INSECURITY
Relatedly, businesses are suffering as Nigerians flee regions prone to pre and post election violence. And as they relocate from the volatile areas, particularly in the North, the level of trade between states is grossly affected.
Unfortunately, those relocating with their families are deprived their means of livelihood which in turn weakens the already comatose economy.
PRICE OF FOODSTUFF SOARS
With panic buying pushing up prices of foodstuff and essential commodities, economic experts believe this trend is principally fuelled by extreme political activities.
ENCOMIUM Weekly’s investigations revealed that the fear of violent crisis rocking the nation before and after the elections has prompted Nigerians to stock their homes with enough food in case any of any eventuality.
This kind of panic upsets the market and can trigger scarcity and inflation.
MANIPULATION OF ECONOMIC STATISTICS
It has also been alleged that government officials, in a bid to present a rosy economy, are cooking up statistics. The danger in this is that business operators would be misled as they take critical decisions that can make or mar their investment based on this. Even at the national level, the integrity of data flaunted by the economic management team is not only compromised on the altar of politics, it could also further ruin the battered economy.
Many are of the opinion it is morally wrong to play politics with the state of the Nigerian economy since it would affect everybody.
– UCHE OLEHI