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FACTBOX-Key political risks to watch in Nigeria
December 1, 2010 / 12:26 PM / 7 years ago

FACTBOX-Key political risks to watch in Nigeria

LAGOS, Dec 1 (Reuters) - Nigeria’s presidential race is wide open with four months to go until polling day, government spending is on the rise, and the threat of unrest hangs over its its economic heartland, the oil-producing Niger Delta.

The ruling People’s Democratic Party (PDP), which has seen its candidate comfortably win every leadership contest since the end of military rule more than decade ago, is divided over its nominee for the April polls. [ID:nLDE6AL1JI]

Nigeria’s political system, driven largely by patronage, has always favoured the incumbent. But President Goodluck Jonathan -- a southerner -- faces concerted opposition from factions in the north and his nomination is far from given.

The outcome of the elections could have far-reaching consequences, from security in the Niger Delta to the passage of legislation to overhaul the oil industry, as well as multi-billion dollar plans to privatise the power sector.

Public borrowing is growing rapidly and foreign reserves have been falling as spending is ramped up ahead of the polls, leading to concern about fiscal discipline in sub-Saharan Africa’s second-biggest economy. [ID:nLDE6AM1P0]

But the banking sector and capital markets remain relative bright spots, with reforms continuing apace despite the near-term political uncertainty.

Following are some of the factors to watch:


The electoral commission has set presidential elections for April 9, 2011, with parliamentary polls a week before and state governorship elections a week after. The timetable means party primaries must be held by mid-January. [ID:nLDE6AM2BY]

In the immediate term, all eyes are on the PDP primaries.

Jonathan’s candidacy is controversial because of a ruling party pact that power should rotate every two terms between the largely Muslim north and mostly Christian south. [ID:nLDE66Q1EY]

Jonathan is a southerner who inherited the presidency this year after the death of Umaru Yar‘Adua, a northerner who died part way through his first term. Jonathan’s supporters say he was elected on a joint ticket and has the right to contest.

A group of influential northern politicians has picked former Vice President Atiku Abubakar as a “consensus candidate” to challenge Jonathan at the primaries, but it is unclear how wide his support base is outside the clique that selected him.

Key to who wins will be the state governors, who form a powerful caucus within the PDP and wield significant influence over the delegates who vote at the primaries.

Two states in the country’s southwest -- Ekiti and Osun -- have seen their PDP governors removed by the court challenges in recent weeks, eroding the ruling party’s grip on the region around the commercial capital Lagos. [ID:nLDE6AP1AW]

Not only could this weaken Jonathan’s hand in the primaries, it could also mean a tougher battle for the eventual ruling party candidate because it will be more difficult for the PDP to win votes in the presidential race in non-PDP states.

Ask three Nigerians how the polls will end and the response is at least three equally well-argued scenarios. History has always favoured the incumbent but possible outcomes include:

-- The governors align behind either Jonathan or Abubakar, who wins the primaries and goes on to take the election.

-- Jonathan wins the primaries by a narrow margin and the PDP remains divided. Northern factions in the PDP break away to challenge him in the election, a scenario which could favour opposition figures such as ex-military ruler Muhammadu Buhari.

-- The PDP resolves its divisions by picking neither Jonathan nor Abubakar, uniting instead behind a third candidate.


Analysts expect government spending to rise in the run-up to elections. Government borrowing has increased 50 percent since the start of the year, dwarfing private sector credit growth of just 3 percent, according to the central bank. [ID:nLDE6AM1P0]

Foreign exchange reserves fell 20 percent year-on-year to $34 billion by mid-November, although that was a marginal increase on the previous month and Finance Minister Olusegun Aganga has said the depletion has now stopped. [ID:nLDE6AN21A]

The excess crude account, into which Nigeria saves windfall oil income, has dropped below $1 billion from $20 billion at the start of the presidential term in 2007. Parliament is debating a bill to create a sovereign wealth fund to replace it.

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.

Officials have said the bill will pass before the elections, but a Senate committee which has been reviewing it for the past year has only just finished work and lawyers advising the government have said that timeframe is unlikely. [ID:nLDE6AI0IM]

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. [ID:nLDE69D0OX]

But 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. Some analysts are worried about the inflationary impact of a new “bad bank” set up to absorb non-performing loans from lenders rescued last year.

What to watch:

-- Further depletion of foreign exchange reserves

-- Passage, or not, of oil reforms before elections


The military appears to have the upper hand in the Niger Delta, taking over a number of militant camps in recent weeks and releasing 19 hostages in an operation carried out with the help of former militant leaders who accepted amnesty last year.

But the Movement for the Emancipation of the Niger Delta (MEND) has threatened more attacks, and associates of Henry Okah -- one of MEND’s masterminds who is in detention in South Africa -- appear to have established links with new field commanders to replace those who took amnesty. [ID:nLDE6AJ01Z]

Security sources say the next few weeks will be key and that the military needs to continue to move against newly emerging leaders if MEND is to be prevented from realising its threat.

Oil infrastructure in the delta, a network of shallow creeks opening into the Gulf of Guinea, is extremely exposed, with thousands of kilometres (miles) of pipeline passing through remote and thickly forested terrain.

Disputes between local communities and oil firms are common, and attacking a pipeline and shutting down production requires little more than simple home-made explosives.

Saboteurs attacked a pipeline to the 110,000 barrels per day (bpd) Kaduna refinery in late November, forcing it to shut down, and Royal Dutch Shell (RDSa.L) has declared force majeure on some of its exports after pipeline damage. [ID:nLDE6AO1AE]

Fears of localised violence in the run-up to the elections -- particularly in flashpoints including the Niger Delta, the remote northeast and the Middle Belt region between the north and south -- have been heightened by two weapons seizures.

The destination of the first, shipped from Iran, was unknown but some diplomatic sources have said it may have been meant to destabilise the country around elections. [ID:nLDE6AO1WT]

Nigeria is a generally peaceful nation but ethnic and religious rivalries bubble under the surface and could be exploited by politicians, particularly with the north-south debate such a key factor in the presidential race.

What to watch:

-- Further attacks in the Niger Delta

-- Ethnic or religious rhetoric during campaigning (For more Reuters Africa coverage and to have your say on the top issues, visit: ) (Writing by Nick Tattersall; Editing by Giles Elgood)

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