March 1, 2011 / 5:53 PM / 7 years ago

FACTBOX-Key political risks to watch in Nigeria

LAGOS, March 1 (Reuters) - 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


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: ) (Editing by Alison Williams)

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