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Polls postponement could cost Nigeria $10 billion, analysts warn

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Economic analysts have warned that the postponement of elections by a week can lead to business slowdown that will cost the nation about $10 billion.

The Director-General of  Lagos Chamber of Commerce and Industry (LCCI), Mr Muda Yusuf, estimated that Nigeria could have already lost up to $1.5 billion.

Findings revealed that losses in the shipping sector alone is more than  N600 million. This is as ports across the nation had been shut down on Friday ahead of the Saturday’s polls.

According to experts, a key implication of the abrupt postponement, was an immediate threat to investors’ confidence which was speculatively building up in the financial markets in the past two weeks.

Similarly, the nation’s  aviation, banking, gas and oil, and  road transport network have been badly hit by the electoral issues.

The postponement is expected to heighten uncertainty in the economy, and erode investors’ confidence in the Nigerian economy. It is likely to also trigger rise in fixed income yields and increased pressure on the external reserves.

Speaking on the issues, Managing Director/Chief Executive officer, Financial Derivatives Company, Mr. Bismarck Rewane, said: “The total cost, including opportunity cost, direct cost, consequential cost, disruption cost and what we call reputational cost, if you put it together, everything will give you about 2 to 2.5 percent of Gross Domestic Product (GDP), which is about $9 billion to $10 billion dollars.”

In his contribution, Ayo Akinwunmi, Head of Research, FSDH Merchant Bank, said the nation’s GDP could also be affected.

“It is going to slow down business activities because that is like two weekends paralysed. A lot of people have travelled, a lot of shops have closed today and they still remain closed because people who have travelled out of the country, people have made other plans,” he said.

“And many of companies did like half day yesterday, so lot of economic activities were reduced yesterday (Friday) because of election today (Saturday). So next week Friday and Saturday, we are going to see the same thing, people will sit at home. And whether we believe it or not, a lot of people wake up and live on daily earnings.

“When you have long period of uncertainty, people cannot take decision. It may actually slow down the GDP. And if you look at the GDP, it is accumulation of what happened every day, throughout the 365 days.

“So if we allow people to stay at home, businesses will not work. Their profit will reduce, taxes will reduce, government will not have enough money and government will have to borrow more.”

Read also: EU, AU, UN, other observation missions urge INEC to adhere to new dates

Senior Research Analyst with Ecobank Nigeria, Mr Kunle Ezun, also said, “ The cost to the economy is going to be huge. Even though it is a weekend thing, the daily turnover today, people who would have gone out for business, all of that have been forfeited now.

“So in terms of losses to individuals and small enterprises, it will be quite huge. “Even yesterday (Friday) most of the states declared public holiday; so you can begin to consider the impact on the GDP of those states.”

Speaking on the impact of the postponement on the economy and the capital market, Akinwumi said: “The most important cost   is the reputational cost. Investors will now say the process of election has been compromised, and this country has become more prone to conflict because of this. Investors’ confidence will be eroded.

“Democracy is about consensus. In 2015, we did not have a problem because the incumbent accepted defeat. Neither did he go to the tribunal or tell the people to riot on the streets. Today, because of so many things, including this postponement, it appears unlikely that anybody will agree to concede or walk away gracefully. As an investor, I will have to take that into consideration and the higher risk, the higher the expected returns. In other words,    if we are borrowing money or if we are raising money, people that are coming to invest will demand more.”

“The postponement could affect confidence in the market, and if confidence is eroded, there could be over-reaction in the market, there could be sell-off,” he added.

“There is an apprehension, there is fear, which leads to improved risks which will make people to ask for more premium on fixed income securities, which could mean there could be sell-down. And sell-down will make yield to go up.

“On the foreign exchange scene, when people have elevated risk, foreign investors may say, ‘men, we need to go out’, and when they go out there will be more demand for foreign exchange and, when that happens, currency value will depreciate. The CBN can say, `okay, guys we need to step up to ensure we meet this demand. And this means there would be a lot of pressure on the external reserve. So in a bit not to allow that depreciation to happen, the CBN will have to spend more money from the external reserves.”

On his part, the director General of LCCI, Yusuf, said: “The  cost to the economy of the postponement of the election is horrendous. The economy was on partial shutdown the day before and total shutdown  on Saturday for the elections that did not hold.

“Cost to the economy is estimated at $1.5 billion . The postponement has implications for confidence in the electoral process

“The trouble was that the notice of postponement came too late to allow economic players to make alternative use of their time.  It was a major disruption to economic activities in the country.

“Borders were shut, schools were closed, ports were shut, All these have implications for operating costs. “In the maritime sector, importers will bear additional demuurage cost  because of the longer cargo dwell time at the ports.

“The cost to the nation’s treasury of the election rescheduling will be almost double   as a large part of processes will be repeated in a week’s time.”

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