What do elections mean for Nigeria's economy?
It's a new year, and everyone is looking to start on a good note. Most people have drawn up goals, plans and resolutions they hope would guide their lives throughout the year, so have governments. Towards the end of last year, the Nigerian government passed its 2022 budget and even laid down a new medium-term development plan.
But 2022 is not like every other year.
It's the year before the general elections, and it is also the final year the Buhari government spends in power because every president is entitled to just two tenures (four years each). Therefore, regardless of how you feel, the Buhari government will end in 2023.
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Pre-election years are when governments, including Nigeria, double down on spending or control their income through taxes to win voters. But Nigeria has long depended on oil revenue and, until the present administration, did not earn much revenue from taxes.
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The implication of such changes in the policy direction of an economy is diverse. For instance, government spending before an election might suggest higher inflation. However, the reverse has been the trend in the years preceding Nigeria's past elections.
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Investment is another trend that can change during a pre-election year. Foreign direct investment has a reputation for exiting during pre-election and election years, primarily due to the uncertainty of having a new government. But previous data from previous years show we can't conclude that FDI's reduce in pre-election years.
This election is also quite important to Nigerians because the economy has suffered two recessions in the last five years; inflation and unemployment are also at alarmingly high rates. So, Nigeria is desperately in need of some fiscal guidance.
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