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Economic Impact Of Postponing The 2019 Nigerian Elections

Economic Impact Of Postponing The 2019 Nigerian Elections

The Independent National Electoral Commission (INEC) in the early hours of Saturday 16 February announced its decision to postpone the elections by one week, stating logistical difficulties as the reason. This decision has significant micro and macro economic impacts and experts have been looking at the implications.

The rescheduled election will cost businesses in the country about $7.605 billion (N2.737 trillion). This amount is approximately 2% of the country’s Gross Domestic Product (GDP), which is nearly $427 billion. Chief Executive of the Financial Derivatives Company Limited (FDC), Mr. Bismarck Rewane, listed the costs associated with the postponement of the elections to include:[1]

· Direct cost — This is the cost wholly assigned to the production of specific goods or services. Some states declared Friday 15 February a work-free day and businesses and financial institutions operated half-day because of the elections. Though Saturday is not a working day for most companies, the cost of shutting down the economy for the day produced a direct cost of approximately $1.170 billion (Nigeria’s GDP per day).

· Disruption cost — This is the cost attributed to an event, activity or process which triggers an unplanned, undesirable deviation from the anticipated delivery. Multiplying the daily direct cost by three produced a disruption cost of $3.51 billion. For example, weddings booked for Saturday 23rd February and 9th March would have to be changed.

· Opportunity cost — This is the next suitable alternative cost of a product or service. About 50% of the daily direct cost produced an opportunity cost of $585 million. This includes things people would have done on the scheduled election dates.

· Consequential cost — This is the cost associated with the inability to use business property or equipment due to unforeseeable activity or process. This is usually twice the direct cost, approximately $2.34 billion.

· Reputational cost — This is the cost that an entity may experience as a result of damage to its reputation. This cost is not quantifiable since it is associated with the damage the election postponement caused the country’s reputation, especially from the perspective of FDI and foreign election observers.

Furthermore, the postponement had a ripple effect on individuals and caused major disruptions to Nigeria’s economic activities. The analysis of the economic impact on individuals and selected segments of the industry are categorized below:

1. Individuals: There has been increased spending carried out by households in anticipation of the nation’s elections. This was evident by increased queues of cars in the petrol stations and increased activities in the open markets. Also, there are cost implications of cancelled weddings, burials and other events and ceremonies already scheduled for the new proposed election dates- February 23 and March 9.

2. Transportation Expenditure: All borders in the country were closed leading to loss of international transactions and movement of goods from and to neighbouring countries. Major Nigerian airlines such as Air Peace, Arik Air, and Dana Air, cancelled a total of 145 flights with a projected revenue loss of about N290 million on Saturday.[2] This results in a total projected revenue loss of about N870 million with the election postponements.

As Nigerians can only vote in polling units where they were initially registered, people had to travel to their constituencies to exercise their voting rights incurring transportation, accommodation and feeding costs. There are reports of international observers and Nigerians who flew in from Europe, Asia, and America to vote. For instance, a return flight from Europe, Asia and America will cost approximately N400, 000, N500, 000 and N600, 000 respectively.

3. Education: Schools planned their calendar and operations around INEC’s earlier schedule with students sent home. Lagos State newly adjusted calendar means students will only have 10 days as second term holiday instead of 14 days. The postponement of the elections would also affect students preparing for the West African Examinations Council (WAEC) and other external examinations.

4. Macroeconomic Effect: The rescheduling of elections could potentially incur more costs than the N189 billion approved for INEC for the 2019 election. This could widen the fiscal deficit and could amount to additional borrowing by the government. It also raises the country’s risk as any attempt to borrow externally will be at a higher cost.[3] Lastly, rescheduling of elections could weaken investors’ sentiments, possibly triggering further capital flight.

The delay will impact turnout among Nigeria’s 84 million registered voters says Stanley Azuakola, Director at Civic Monitor. Many voters will likely be unable or unwilling to change their travel plans allowing them to vote.[4] It also increases the risk of uncertainty and doubt in the minds of the voters on the ability of the commission to conduct free and fair polls.

To buttress all of the above, a 2-part research survey was conducted by Ciuci Consulting to determine the economic cost of the election postponement. Part 1 comprised a series of 9 closed questions while Part 2 comprised 2 open questions. The results of the survey are shown below:

Part 1 Results (Closed Questions)

A total of 180 Nigerians completed the survey — 57.22% were males and 42.78% were females

Respondents were from different age groups, approximately 71% of the respondents are aged 25–44

Approximately 50% of respondents reside in Lagos

Majority of respondents did not incur traveling cost to exercise their voting rights. This is shown in the chart below.

Over half of respondents increased their spending significantly in preparation for the elections.

According to the survey, respondents held INEC and the Federal Government responsible for the abrupt postponement of the elections.

The survey shows that over half of respondents have lost confidence in the electoral process. 73% of people who had to travel for the elections reported that they have lost confidence in the electoral process.

Although cost implications were observed, only 12% of respondents indicated the election postponement affected their candidate choice.

Research shows that 31% of respondents are less likely to participate in the postponed elections.

Part 2 Results (Open Questions)

Q1. How will the postponement of the elections affect your planned costs?

· 17.65% of respondents stated the postponement of elections will result in increase in household expenditure due to stock piling of food items and buying of petrol/diesel to run generators for another week.

· 14.71% of respondents stated the postponement of elections will result in double their logistics cost, which includes the cost of transportation, accommodation and feeding in locations close to registered polling booths.

· 11.76% of respondents stated the postponement of elections will result in reduced revenue generation because the weekly income of their households is lowered as their businesses will operate more half-days.

· 11.76% of respondents stated the postponement of elections will result in increased business operating cost, particularly for those that have direct input on a contract basis such as the creative space and manufacturing entities that would have lost irrecoverable man hours.

The chart below summarizes how the postponement of the elections affects respondents planned costs.

  • 28.75% of respondents stated the postponement of elections will result in rescheduling of business activities because all pre-scheduled meetings for the weekend of 23rd February will have to be moved. Rescheduling meetings can have various effects such as loss of business/deals and delayed revenue generation.
  • 8.57% of respondents stated the postponement of elections will prolong uncertainty, particularly for businesses that deal with foreign investors. As a result, the level of economic uncertainty increases subsequently frustrating any deal in the pipeline.
  • 22.86% of respondents stated the postponement of elections will increase business operating cost and loss of revenue, particularly for those that have direct input on a contract basis such as the creative space and manufacturing entities that would have lost irrecoverable man hours.

The chart below summarizes how the postponement of the elections affects respondents work or business.

The results from the research survey further proves the secondary research on the increased cost on individuals and businesses associated with postponing the elections. The study also shows that the postponement of the election increases the risk of doubt in the minds of the voters in the ability of the commission to conduct free and fair polls. Considering, elections were postponed in 2011, 2015 and now 2019, INEC and the Federal Government should ensure they are better prepared in order not to affect Nigerians overall disposition to voting and further influence investors’ confidence.

 

 

[1] (Thisdaylive, 2019)

[2] (Thisdaylive, 2019)

[3] (Blueprintng, 2019)

[4] (Quartz Africa, 2019)

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