Lessons learned

Nigeria’s recent peaceful elections herald an era of stability for the country – good news for economic growth, says Msafiri’s Business Columnist, Nkem Ifejika

BusinessIn the week leading up to the recent presidential elections in Nigeria the currency, the naira, was trading at around 215 to the dollar. Fast-forward to the week after the polls, and the naira had risen to around 190 on the black market (which is usually a more accurate reflection of the market). Stocks which had risen and then plunged to such an extent that it appeared there hadn’t been any gains in President Goodluck Jonathan’s first term suddenly jumped again after the elections. Apart from the low price of oil, many of Nigeria’s woes began to look like non-issues.

A weak currency is a terrible thing for an import-dependent country such as Nigeria. A trader selling goods would earn money in naira, and then have to convert to dollars to send to suppliers abroad. If the currency keeps weakening in value, the number of dollars per naira also reduces, limiting purchasing power. Those extra costs are usually passed on to consumers.

So what was the magic dust sprinkled by General Buhari upon his election? The reaction of the markets wasn’t so much about Buhari as much as it was about the manner of his victory.

In the run up to the elections there was a lot of tension in Nigeria. So much had been put on hold. People weren’t making big investments because they wanted to know the outcome of the polls. Nobody wanted to invest in a country which might or might not have existed after 28 March. Many articles written about the election spoke of the strong possibility of post-election violence, and some even talked about the break-up of the country.

The Ugandan businessman Elly Karuhanga once told me: “Capital is a coward.” Where there is risk, money shies away. The naira was so weak because people were hoarding hard currency based on worries of a devaluation after the election. If the naira might lose its value, it made sense to convert, and this drove up the dollar. And investors were panicked about stability, which is why they pulled money out of the stock market.

As soon as Goodluck Jonathan conceded defeat to Muhammadu Buhari, it became clear there’d be no long-drawn-out battle for the presidency, and there’d be minimal violence. Everyone relaxed, brought out their foreign currency, and started investing in Nigerian stocks once more. It was a collective sigh of relief, the equivalent of leaving the house after battening down for a storm which never came, and heading to the beach to relax and eat some ice-cream.

The lesson in all of this is simple – stability has always been a prerequisite for economic growth. There’s nowhere this is more needed than in Africa. The respected Africa commentato, Richard Dowden said the elections would be the most important African event of the decade. And in many ways, they’ve proven to be so – from lessons learned about strong campaigning by the opposition, to conceding graciously by the governing party, to the benefits of peace and stability, which aren’t always immediately obvious, but are oh so significant.