As Nigerians brace up for the 2015 general elections, industry watchers have continued to express concern over bank lending to politicians. Not a few have warned, therefore, that the development may be harmful to both the banking industry and the economy . Politicians are already perfecting their strategies on how to achieve their political ambitions ahead the 2015 general elections.
According to Mr. Boniface Okezie, a shareholder activist, there is little the Central Bank of Nigeria (CBN) can do to stop politicians from spending, stressing however, that the apex bank must not allow any banks to finance overtly or covertly, the camaipgns of politicians.
The various political parties are conducting their primaries to elect their flagbearers for elective positions. A corollary to this, has been the stupendous spending by politicians to woo their numerous supporters . But the question bordering many Nigerians is how prepared are the financial regulatory authorities to check excess money in circulation for the good of the economy.
Meanwhile, the Nigerian economy has come under severe pressure arising from the current slump in oil prices at the international market and the devaluation of the nation’s naira.
Again, with the Re-basing of the nation’s economy, it is general believed that the economy has been relaunched on the path of sustainable growth. However, one of the key benefits of the rebasing exercise is that its results enables policy makers and analysts obtain a more accurate set of economic statistics that is a truer reflection of current realities, for evidence-based decision-making.
Rebasing also reveals more accurate estimate of the size and structure of the economy by incorporating new economic activities which were not previously captured in the computational framework.
It generally believed the world over , that every election year is characterized by much spending both on the side of the government and individuals as a result of printing of election materials and political campaigns. Nigerians are currently expressing fears over the possibility of too much money in circulation due to much political activities which is currently ongoing.
Just like the high-profile U.S. Senate races in 2014, state-level elections in North Carolina attracted a lot of money from super PACs and other outside groups, industry watcher are of the strong view that Nigerian politicians should desist from borrowing from the banks and source for money from their personal investments.
But in a bid to allay fears in the minds of many Nigerians, the Minister of Finance, Dr. Ngozi Okonjo-Iweala, had assured Nigerians that the government and private sector’s spending for the 2015 general elections would not lead to inflation, adding that all necessary measures had been put in place to check the inflation rate.
She assured Nigerians and members of the international community that the nation’s financial system had remained stable. “Activities leading to the polls will not in any way lead to an increase in inflation rate.
While the price of oil at the international market is falling in recent times, Dr Okonjo-Iweala stressed that there was a contingency plan to avoid shocks that were likely to come with the fall in oil prices.
The CBN, through its Monetary Policy Committee (MPC) meeting , had expressed concern that government spending linked with the 2015 general election is one of the factors that will stimulate inflation in the medium term.
According to the MPC’s statement as highlighted on page 7 of the September 2014 Communiqué “The policy challenges would include sustaining the stability of the naira exchange rate, managing the vulnerability to capital flow reversal, building fiscal buffers to insure against global shocks, managing inflation and exchange rate expectations and safeguarding the financial system stability as well as a build-up in election-related spending.
The CBN governor, Godwin Emefiele, had at the meeting said : “In the domestic environment, factors such as election-related expenses, likely increase in electricity tariffs, global rise in food prices, and supply shocks due to insurgency constitute upside risks to the medium-term inflation outlook.
Another member of the MPC, Adelabu Adebayo noted that “election-related expenses, depreciation of the exchange rate at the Bureaux De Change (BDC due) to current measures, rising global food prices, and seasonal factors portend upside risks to price level, particularly core inflation in the near term.
Speaking with Daily Champion, a shareholder activist, Alhaji Tokunbo Gbadebo, who expressed concern over profitability in the Nigerian banks in the 2015 financial year, maintained that banks should not allow politicians to intimidate them.
According to him, “the banks should not borrow to any politician, they must put their feet on the ground and not allow any politician to intimidate them because the banks are supposed to lend to the real sector to grow the economy and not to finance any electoral campaign, if they do, that would be disastrous to the economy even to the banking sector.
“Which collateral are they going to use ? Is it the government house ? They should not dabble into that, it is not the banking sector responsibility to begin to support political activities, they are excluded from doing that,” he maintained.
Speaking further, he said, no politician should be allowed to borrow from any bank, no matter how highly placed they are, if they are using their savings from investment to finance their political ambition so be it, but not to deep hand in the treasury, that is the only way they can control the inflation in the economy.
To him, the government will continue to spend in election year, “everybody is spending both those sponsoring themselves and those spending from the treasury to finance the politics, as much as they are spending prices will continue to be higher, after the election, they will now sit down and begin to address the issues.
He said God has endured Nigeria with resources and manpower that is one of the reasons why investors are interested in investing in Nigeria, saying that the political situation in Nigerian now is posing a threat to investors, adding that insecurity is another challenge the forth coming general elections might face.
Also, leading financial services provider Renaissance Capital (RenCap) had in February predicted a decline in foreign exchange reserves, citing sub-par oil production and higher imports due to election-related spending.
However, the World Bank in its annual report on poverty , identified Nigeria as one of the least successful countries not addressing poverty alleviation in its entirety since the introduction of the Millennium Development Goals (MDG) 14 years ago.
Ngozi Okonjo-Iweala, Finance Minister and Coordinating minister of the economy, has done well in providing a ‘forward guidance’ that spending related to the 2015 general elections will not increase rate of inflation.
The relationship between election spending and inflation remains an empirical matter.