The Nigerian Election

by Thomas Wash of Confluence Investment Management, 2/12/19

The Nigerian Election

On February 16, 2019, Nigeria will hold its sixth presidential election since it ended military rule in 1999. President Muhammadu Buhari, who has been rumored to be in bad health after disappearing from public view for weeks at a time, is facing a serious challenge from the former vice president, Atiku Abubakar. Although there are several other challengers, their chances of winning are slim.

In a country where presidents typically serve two terms, Buhari appears vulnerable to being removed from office after his first. In a word, his first term can be described as turbulent. The economy fell into recession, there were bouts of fuel scarcity and his health troubles sparked rumors that he had been replaced by a Senegalese body double.[1] In 2016, even his wife registered her discontent with his performance by insinuating that she may not support him in his re-election bid. Recent actions by Buhari and his government suggest he has not taken his declining popularity in stride. As a result, there is growing concern that the election could become violent.

Even though the last election saw a relatively peaceful transition of power, historically, elections in Nigeria have been violent. Thus, this election has garnered international attention as it could possibly lead to broader conflict within the region. While we are concerned with the humanitarian aspects of this event, the primary focus of this report will be on how the election could impact financial and commodity markets. We will examine the overall political situation in Nigeria, the issues surrounding recent elections and the potential for unrest following the vote. As always, we will conclude with potential market ramifications.

Brief History of Nigeria

Nigeria is located in West Africa and has the continent's largest population and economy. It is the largest oil producer in Africa and the 7th biggest supplier of oil to the U.S. Due to its size and scope, Nigeria has outsized influence in regional affairs and is widely considered the prominent power in Africa. This is seen in its pronounced role in multilateral organizations such as the Economic Community of West African States (ECOWAS) and the African Union.

As a result of the country's past as a former British colony, it remains split along religious, tribal and geographical lines. Nigerians who live in the north are predominantly Muslim and are part of the Hausa or Fulani tribes. In the southwest, Nigerians are split between Christians and Muslims and generally come from the Yoruba tribe. The southeastern region is predominantly made up of Christians generally from the Igbo or Ijaw tribes. There are other groups that follow traditional religions within Nigeria but they represent a minority. In total, there are over 400 different ethnic groups in Nigeria. Ethnic differences between these groups are a key source of political tension.

(Source: Africa Center for Strategic Studies)

The northern region has had disproportionately more power over the southern region as the military is primarily headquartered in the north. Furthermore, though the nation’s capital was located in the southwestern city of Lagos until 1991, almost all heads of state were from the northern region. As a result, people living in the south have accused the north of using their political clout to steal from them; most of the country’s mineral resources are in the south. In order to quell unrest, there is a general agreement between the north and south that the presidency will switch every two terms.