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NIGERIA: Second time lucky?

By John Chiahemen
24 May 2010

A bitter power struggle within Nigeria’s ruling party ahead of next April’s elections could imperil much needed economic and political reforms

Nigeria always gets a second chance – or so many of its political elites would believe. But after about half a century of missed opportunities and near misses, sub-Saharan Africa’s second biggest economy faces another monumental obstacle in the form of general elections next April that many now see as its last chance to get political and economic reform right.

Nigerian elections have been a high-wire act since the 1950s. With president Umaru Yar’Adua’s passing on May 5, the first death in office of an elected Nigerian head of state, the stakes in the coming polls look certain to rise even higher. Election talk has already eclipsed the country’s 50th anniversary of independence in October.

The immediate casualty of the looming electoral hurricane, according to many Nigerian analysts, will be economic and political reforms Nigeria badly needs to avert a slide from uncertainty to calamity. The policies that need urgent attention include a reform of the mainstay oil industry, ending unrest in the oil-producing Niger Delta, cleaning up the electoral system that made Nigeria a laughing stock after the last polls in 2007, and revamping a shambolic electricity sector.

More urgently Nigeria needs to address a deficit in its 2010 budget running at over 1.5–1.6 trillion naira (roughly $10 billion) or 6% of GDP.

“The economic reform agenda is now on hold,” says analyst Bismarck Rewane of Lagos-based Financial Derivatives Company Ltd. He expects all spending and resources to be targeted at extracting the maximum political capital from the elections.

“The reform policies are dead,” is the verdict of public policy analyst Pat Utomi, a presidential candidate in the 2007 elections, won by Yar’Adua but roundly condemned by local and international observers as a sham. “The truth is, it’s all about power and money. That’s all that seems to concern our political elite,” Utomi says.

Yar’Adua’s deputy Goodluck Jonathan was sworn in on May 6 as president in a swift move in line with Nigeria’s American-style constitution. But Jonathan’s elevation has raised a serious potential crisis in the ruling People’s Democratic Party (PDP) that could spill over dangerously in the approach to next year’s election.


Under the PDP’s own rule, power should be rotated between the north and south of the country every eight years. Former president Olusegun Obasanjo, a Christian Yoruba from the south-west, was the first beneficiary of the PDP policy. Yar’Adua, a northern Muslim, took over after Obasanjo’s second four-year term but died before completing his first mandate. Many influential PDP officials, including its powerful block of northern governors, expect Jonathan’s role to be no more than that of a seat warmer for a northerner who would take over next year.

Jonathan is from the southern oil-producing Niger Delta, and under the PDP’s zoning formula, would be expected to wait for his region’s turn. Not so, say his supporters and opponents of the PDP, who have mounted pressure on the former zoology teacher to seek the presidency next year.

Jonathan has so far given no categorical intention of his plans, but some of his actions have indicated he is inclined to run. Many national newspapers reported prominently that PDP chairman Vincent Ogbulafor’s resignation this month, after being charged in court with corruption, was not unconnected with his earlier statement declaring that Jonathan would not be qualified to run for the presidency.

Jonathan has picked the politically low-key governor of Kaduna State, Namadi Sambo, a northerner, as his own deputy. Ordinarily this would have been interpreted as a shoe-in for Sambo as the PDP’s presidential candidate next year, were he known to have ambitions for national leadership.

With the elections only months away, Nigerians are bracing for a fierce internal battle within the PDP over its presidential nomination. Many PDP insiders dismiss any review of the party’s power rotation rule to accommodate Jonathan, saying such a move could upset the stability of the whole country.

“The day Jonathan declares he will run will be the day the party will initiate moves to impeach him,” one senior PDP member says. “And if he should decide to run as a candidate of another party, that’s equally an impeachable offence.”

Compounding the political power struggle are the presidential ambitions of some of Nigeria’s most powerful retired generals from the north, notably former presidents Ibrahim Babangida and Muhammadu Buhari. Not to be left out is Obasanjo’s former deputy, Atiku Abubakar, although his political relevance is diminishing.

Despite these challenging prospects, Nigeria’s 1999 constitution has shown much greater resilience than any the country has known. The first successful change of leadership through the ballot box was recorded under the current constitution. As flawed as the 2007 elections were, all electoral disputes, from regional assembly polls to the presidential ballot, were settled through the law courts. Many Nigerian politicians speak proudly of this record.

“Even the much maligned zoning (power rotation) of the PDP has been a source of stability,” one senior PDB politician says. “Jonathan would not have been president today if he had not been Yar’Adua’s deputy as part of the PDP’s power balancing.”


What is almost indisputable is that the struggle for political power will dominate the Nigerian agenda up to elections in April. But if so, it is difficult to see how Jonathan can keep his focus on key policy decisions he has to make quickly to prevent Nigeria sliding into double-dip recession.

He has to come up with a concrete plan to finance the country’s deficit, including $4 billion extended to Nigeria’s troubled banks. The government envisages funding part of the deficit from the sale of oil blocks, but most analysts see no significant appetite for such an offering from an outgoing government. Upstream investors are also likely to adopt a wait-and-see attitude without the passage of Nigeria’s new Petroleum Industries Bill to regulate the sector. It looks unlikely to be passed under the current administration.

Despite the political uncertainty, both Nigeria’s GDP and the stock market have shown some resilience. Real GDP grew by 6.68% in the first quarter of 2010 despite a severe liquidity crunch facing the domestic market, compared to 4.5% in the comparable period in 2009. The Nigerian Stock Exchange rose 1.9% in April to bring the year-to-date level to 26.9%. It declined by 32% in the same period last year. Oil production topped 2 million barrels in the first quarter of 2010, almost twice as much as at the height of the Niger Delta crisis.

The biggest challenge for the domestic economy is how to dig it out of stagnation after banks virtually stopped lending following central bank governor Lamido Sanusi’s intervention last year to clean up the banking system. The banks are bracing for new regulatory measures that will notably abolish the universal banking licence.

“The economy is in stagnation; nobody is lending for productive purposes; you don’t know what the next revolution will be,” one analyst says.

By John Chiahemen
24 May 2010