The Nigerian presidential election was won by Muhammadu Buhari, the leader of the opposition coalition (All Progressives Congress – APC), gaining 54% of votes against the incumbent president, Goodluck Jonathan, leader of the People’s Democratic Party (PDP).
The outcome of this closely contested election is a sign that democracy is deepening in the biggest sub-Saharan economy.
The Nigerians are asking for change. Deceived by the lack of improvement in the fight against corruption, unemployment, poverty and inability of the government to bring peace to the North-eastern regions and defeat Boko Haram.
Buhari, the 72-year old former general, had a short experience at the head of the country some years ago. He led the country during the 20 months after the coup in 1983 before being overthrown in 1985. The March election was his fourth attempt to be elected after having been defeated three times at former presidential elections.
The absence of major upheavals during or after the election in March 2015, unlike in 2011 when more than 800 people died after violence following the announcement of the election of president Jonathan, is a positive sign for foreign investors. This could help to provide the country with much needed hard currency to slow down the depreciation of the Naira and finance stronger growth. However, there remain downside risks and the new president will face major challenges.
Declining oil prices severely hurt the economy
– Growth is slowing. The Nigerian economy is experiencing lower oil prices as well as structural shortcomings, in particular relating to energy supply. Despite the restructure of the energy sector, electricity shortages leading to shut downs that affect households and industry are still frequent.
– The budget deficit is deepening. The oil sector represents about 60% of the Nigerian State’s revenues. The 2015 budget was revised earlier this year on the basis of a reduced oil price ($53/bl against $65/bl previously). But fiscal consolidation plans will hamper diversification efforts and negatively impact domestic demand (household consumption and investment).
– The country also lacks financial buffers: reserves are declining and will fall below five months of import in 2015 (seven months in 2013). Oil funds are nearly depleted (Sovereign Wealth Fund amount to 1% of GDP).
Corruption is widespread
-To improve governance is one of the priorities on which APC has built its campaign. To crackdown on those regarded as guilty of corruption was perhaps the main achievement of the first term of M. Buhari in 1980s. But his authoritarian methods were criticised and the new president will now have to fight against some business leaders, who have a lot to lose. Even inside the coalition that brought president Buhari to power, there are competing interests on this matter.
Ethnic, cultural, regional and religious divisions will remain significant in the country.
– President Buhari, as a Muslim coming from the North, may be best prepared to deal with continuing insurgency by Islamist militants of Boko Haram in the north-east. On the contrary, the situation in the South, where the majority of the population is Christian may deteriorate. Jonathan, a Christian coming from the South, succeeded in stabilising the situation in the Niger Delta, the main oil producing region. There is a threat that the Movement for the Emancipation of the Niger Delta (MEND) resumes actions, deterring investments from foreign oil companies, already hit by sabotages of pipelines, oil bunkering and smuggling.
* Anne Sophie-Fevre at Coface, the international credit insurer’s economic & research department in France