The elections and the macro (no 4)

As we continue our search for evidence of macro slippage in the run-up to Nigerian elections, we devote the fourth of our daily notes to foreign-currency, private-sector deposits in the banking system. The CBN has the data for the run-up to the elections in April 2007, April 2011 and March 2015. We have again drawn a blank. The chart does show a clear pick-up for the latest polls: however, the data are denominated in naira, and we have to allow for the devaluations of November 2014 and February 2015. The second also brought the scrapping of the Dutch auctions.

  • We also looked at these domiciliary accounts as a proportion of total deposits over the six months to March. In 2007 the share declined by close to two percentage points, and in both 2011 and 2015 it rose by half a point.
  • This is not the only measure of residents’ take on risk ahead of elections, of course. It would be revealing, if impractical, to capture flight through the parallel market.
  • To recap on the findings of our mini-series, we find inconclusive evidence that FGN spending, inflation, offshore investment on the NSE and domiciliary account holdings 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.
Foreign-currency deposits (private sector; N bn)

Sources: CBN; FBNQuest Capital Research


  • It is too early to establish any trends ahead of the polls in February. We note, however, that the monetary policy committee last month played down the threat to inflation from fiscal expansion.
  • Slippage can be expected if a leading candidate has a radical, anti-business agenda and/or the outcome is very close, and challenged. The first does not apply and we hope the second does not arise.

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