| LAGOS, March 1
LAGOS, March 1 Nigerian President Goodluck
Jonathan is seen as the front-runner in April elections but the
ruling party will face a tougher battle maintaining its strong
parliamentary majority and regional dominance.
Preparations so far for the general elections give grounds
for cautious optimism that the polls could be more credible and
less violent than previous votes in Africa's most populous
nation, although the toughest challenges still lie ahead.
Jonathan, a southerner, faces resistance from areas
including parts of the Muslim north but campaigning in the
presidential race has been largely free of the sort of rhetoric
that could polarise the electorate around regional rivalries.
State and parliamentary polls are likely to be more closely
fought. There has already been localised election-related
violence, including in the oil-producing Niger Delta, the
central "Middle Belt" and the remote northeast. [ID:nLDE71A0HQ]
Key pieces of legislation, including oil sector reforms and
the creation of a sovereign wealth fund, are sitting before
parliament but with political minds focused on campaigning, it
is unclear whether they will be passed before the polls.
Government spending has risen ahead of the elections,
putting pressure on foreign reserves and weighing against
efforts to drag inflation into single digits. A draft 2011
budget has yet to be approved by lawmakers.
The outlook for the capital markets is rosier.
Nigeria successfully launched a debut $500 million Eurobond
65412AAA0= in January as investors shrugged off near-term risk
and the banking sector is emerging from crisis, with a state bad
bank set to absorb all non-performing loans by the end of March.
Investment in parts of the real economy has continued apace
with several global consumer goods firms announcing expansion
plans. Potential investors in the planned privatisation of the
power sector, key to ending chronic electricity shortages, are
proving more cautious until the political picture is clearer.
Jonathan's victory at the primaries makes him the favourite
to win the April 9 presidential election. The ruling People's
Democratic Party (PDP) has won every poll since military rule
ended in 1999. [ID:nLDE70J14V]
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 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. [ID:nLDE71K0MY]
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.
But billionaire businessmen and some former northern rivals
have joined his campaign, including Kwara state governor Bukola
Saraki, a northern challenger at the primaries now in charge of
a "reconciliation committee" in the party. [ID:nLDE71E129]
Ibrahim Shekarau, governor of the northern state of Kano,
and former anti-corruption chief Nuhu Ribadu are also running,
although they are relative political lightweights and their
chances of success are seen as limited, particularly if the
opposition fails to form an anti-PDP alliance.
Under the constitution, an election victor must secure at
least a quarter of the votes in at least two thirds of the
country's 36 states and the capital Abuja.
Opposition parties are hoping their respective strengths in
parts of the north and the southwest could prevent Jonathan from
doing this, forcing a second round, which has to be held within
a week and would most likely pit Jonathan against Buhari.
The Independent National Electoral Commission (INEC) says it
has registered 67.8 million voters in a process which, although
marred by some technical difficulties, has generally been judged
by observers to bode well for polling itself.
What to watch:
-- Any signs of an alliance between opposition parties
against the PDP.
-- Any challenges to the credibility of the new voter lists.
Parliamentary elections and state governorship polls are due
to be held a week either side of the presidential vote and are
more likely to cause localised instability. [ID:nLDE6AM2BY]
Five of Nigeria's powerful PDP state governors won a court
ruling in February which could prevent them having to stand for
re-election. The five argued that their states should be
exempted from governorship votes because they had not yet
completed full four-year terms. [ID:nLDE71M20A]
The decision could be challenged but, as it stands, means
the PDP may avoid some of the fiercest state contests.
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. [ID:nLDE70C1TM]
Several hundred have died in ethnic and religious clashes in
Plateau state in the central Middle Belt since December,
violence likely to intensify ahead of the polls. [ID:nLDE71G0J3]
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. [ID:nLDE70R1VY]
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 attack was meant to undermine Jonathan.
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. [ID:nLDE70Q121]
There have been several kidnappings at sea off the coast of
the Niger Delta, but recent violence onshore has centred around
local elections rather than targeting the oil and gas industry,
a picture seen as unlikely to change for now.
What to watch:
-- Challenge to the court ruling stopping governorship
elections in some states
-- Further localised acts of electoral violence
POLICY AND SPENDING
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. [ID:nLDE71L1SW]
The government has vowed the bill will pass within weeks, a
message it has given before. Should it fail to do so, a new
parliament could set the process back once again, particularly
if the ruling party has a slimmer majority.
Potential investors in the planned privatisation of the
domestic power sector, one of the cornerstones of President
Jonathan's campaign, are also unlikely to go beyond statements
of interest until the elections are over. [ID:nLDE70H1SX]
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. [ID:nLDE6AM1P0]
Foreign exchange reserves have started to stabilise but
remain nearly a quarter below year-ago levels, although oil
prices and production are rising. [ID:nLDE71K17S]
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.
The IMF said in February it believed the naira NGN=D1 was
overvalued but Central Bank Governor Lamido Sanusi has rejected
their logic, suggesting he will continue to defend the local
currency in a tight band around 150 to the U.S. dollar.
Banking reforms, led by Sanusi, continue apace and his
5-year tenure 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:
-- Passage, or not, of oil reforms before elections
-- Further depletion of foreign exchange reserves
(For more Reuters Africa coverage and to have your say on the
top issues, visit: af.reuters.com/ )
(Editing by Alison Williams)