The elections and the macro (no 3)

In our search for macro slippage in the run-up to Nigerian elections, we devote the third of our daily notes to foreign/offshore trading patterns on the NSE before the polls on March 2015. (We cannot locate the series to cover the elections of April 2007 and April 2011.) The data show steady gross offshore inflows from October 2014 through to April 2015, along with net outflows of varying sizes for each month other than the last. This does not represent a rush for the door marked exit, rather a steady trickle out of the NSE.

  • The principal, non-electoral reason for the net outflows is the downward trend in the oil price from an average of US$102.3/b for spot Bonny Light in August 2014 to US$57.5/b in April 2015. We do not need to explain again the correlation between the oil price and the broader, non-diversified economy.
  • As the oil price weakness continued so the NSEASI lost ground and the economy slowed, leading to the recession of 2016 and Q1 2017.
  • The build-up to elections can bring the flight of the offshore investor. This occurs when a serious contender has an anti-business agenda or where markets fear a very close result challenged on the streets and in the courts.
  • The results of the last three presidential elections in Nigeria have not been particularly close nor have plausible candidates threatened radical change.  The second point does not apply for 2019 and it is too early to make a call on the first as the political horse-trading is still in progress.
Transactions on the NSE, Sep 2014 – Apr 2015 (N bn)

Sources: Nigerian Stock Exchange (NSE); FBNQuest Capital Research
  • To recap, we find inconclusive evidence that FGN spending, inflation and offshore investment on the NSE were influenced by the 2007, 2011 and 2015 polls. The exception was the steep rise in expenditure in the build-up to 2011 due to the substantial increase in the national minimum wage, currently topical, approved by the National Assembly.



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