Despite the increased liquidity that electoral activities may bring to the economy, the Centre for the Promotion of Private Enterprises (CPPE) has expressed concerns about the inflationary implications of the liquidity surge, as well as increased political leadership distractions from governance and economic management.
According to the CPPE, the increasing intensity and speed of electioneering activities portend a number of economic obstacles, including inflation and a delayed governance process.
Major economic reform measures, according to the CPPE, have been effectively blocked due to the perceived political cost of such decisions, as the administration has opted for populist policies at a high cost to the economy.
It cautioned that due to a lack of fiscal headroom, the budget imbalance will rise, pushing the country deeper into a financial crisis.
The CPPE indicated that in a season like this, the level of uncertainty is normally higher for investors.
“Because of the higher political risk in the economy, long-term planning is much more challenging.” Many critical business decisions, particularly those involving long-term initiatives, have been postponed. The outcome of these postponed decisions is that the economy suffers. The outlook for growth could be further lowered as a result of this.
“Many investors’ emphasis will be short term at this time in order to manage the risk inherent in the uncertainty coming from electioneering processes and the impending government transition,” it continued.
Indeed, the CPPE stated that there is a high likelihood that state apparatus and resources are being used for electioneering activities by political appointees and elected officials, and that the opportunity costs of such misappropriation for citizens are extremely high, particularly given governments’ weak fiscal positions at all levels.
Dr Muda Yusuf, the CPPE’s Chief Executive, warned that due to numerous distractions caused by electioneering activities by political appointees and elected officials, approval processes for government transactions may face undue delays at all levels of government – federal, state, and local governments.
“As political office holders attempt urgently to keep their positions in the next dispensation, political attention to governance and economic management deteriorates. This would have a negative influence on government operations.
“The regularity of legislative activity has slowed noticeably as legislators in the federal and state legislatures focus more on electioneering activities to keep their seats or exploring other political options. Many critical bills that are currently being considered are likely to be delayed.
“As a result of electioneering and political activities, legislators’ oversight duties have been effectively placed on hold.” Many legislative houses are having trouble forming quorums,” Yusuf continued.
The CPPE also expressed concern about the voting population, describing them as not helping matters because most voters are more concerned with short-term and immediate benefits from the political process than with a thorough examination of the capacity of political parties or political contenders to contribute to economic development.
“As a result, the economy is seeing a frenzy of cash, both domestically and internationally.” The financial system’s cash reserves have been severely reduced in the last month, and the trend is expected to continue until 2023. It cautioned that “the economy is awash in cash, which has ramifications for liquidity, aggregate demand, and price inflation.”