A little book I read in high school, It’s Our Luck, made a deep impression on me and it stuck. One of the popular quotes from this dramatic book, by Ene Henshaw, is: “A mighty wind will blow, a heavy rain will fall. There will be destruction. After the destruction, everything will not be the same”. Forgive me if I missed part of this speech by Bambulu, the main character of this book.
Bambulu spoke of an impending revolution that would shake the foundations of a society steeped in traditions and customs that were about to change.
As a nation, Nigeria is on the cusp of an event that will bring about changes in her life politically, socially and economically. The country holds general elections in a year, and as a ritual, it has been accepted that the year before the election is critical. Like the society Bambulu spoke of, Nigerian electoral processes have been steeped in practices that threaten the very foundations of society. So, as usual, there are apprehensions everywhere: from worries about increasing thugs, armed robberies and ritual killings, to increased naira spending, mostly on unproductive activities. Between now and the end of the polls next year, millions of people will be making money they haven’t, in the true sense of the word, worked for. That is, if you accept that a person’s claim to financial assets is the result of the value they have created in the form of goods and services that help meet the genuine needs of others.
This last point is already catching the attention of analysts, who warn that, as usual, pre-election spending in Nigeria will certainly put pressure on the price level and will certainly lead to an inflationary spiral in the economy.
Why is it so? This happens because a large part of the funds that will be spent will go to acts that do not produce services or goods in the real economic sense. The millions of naira and even dollars that will be spent or pulverized in the rallies will simply cause the money supply to increase in the system. It will not add any corresponding increase in goods and services. Perhaps, apart from the printing of election posters and a few other activities, the funds are generally used to fuel the political apparatus to pave the way for candidates, sometimes pitting one camp or party against the other. Such acts, as innocuous as they seem, are in fact a headache for the governor of the central bank. So Godwin Emefiele (is he himself in the race?) knows that the CBN’s calculations or assumptions about the money supply or silver in circulation will be rendered obsolete by the avalanche of silver that will be released by political gladiators.
So, as in the case of the book quoted above, the leaders of our economy are always worried about any national election approaching because they know it is a time of spending without production; receive money with which to claim goods and services without reciprocal productive activity. It is the bane of sound economic management in the country.
When people wait for the money rain to fall so they can collect as much as they can without restraint, the incentive to work is dampened. Recipients worry less about their expenses because even when prices go up, they know their offer will be up to the challenge.
GTCO Holding Company Plc (formerly Guaranty Trust Bank Plc), captured this phenomenon in its macroeconomic review published on Monday. “Overall, the huge spending and distributions of money that characterize campaigns and election campaigns in the country pose downside risks to headline inflation. Therefore, we expect inflation to average 16.3% in 2022.”
Part of the spending will go into investing in the foot soldiers of the political bigwigs, who will be ready to do the bidding of the master. It will not be money to train and equip young people with the skills to lead productive lives; it will not be money spent on making them more creative in an area of the emerging knowledge economy. Rather, the money could be spent as a pre-given reward for helping to rig the election or undertaking one heinous crime or the other throughout the election process.
The resulting inflation will have its consequences on the general economy. Costs will increase further, including the cost of funds. Yields on fixed income securities will rise to retain their appeal in the face of higher inflation rates. These will put additional pressure on everyone: businesses wishing to borrow funds for business expansion or normal operations, and end consumers of goods and services. And all this will happen just because some people, in their ambitions to seize power, will spend money on negative activities and in doing so will give some disbelievers some money which will enable them to claim property and services.
In some cases, it is really appropriate to say that what these funds pay for are negative goods and services. Society could still have free and fair elections without much of the money that will be distributed by the end of the election.
This scenario is not new, nor is it unique to those fighting for one position or the other now. It has been so with us. It is an unnecessary cost imposed on the rest of us by a flawed electoral system that makes such expenses possible in the first place.
The challenge, therefore, is how to make elections and election campaigns less costly, less harmful and less disruptive to the economy. Election spending limits have been reported, but everyone knows that political parties respect them only by default. In fact, it is evident that the two main political parties – APC and PDP – are struggling to see who will spend more than the other.
Pray, who will help Nigeria? Will the parties talk to their candidates? Who will talk to the moneybags? Who will speak on behalf of the already prostrate economy, emasculated by a myriad of challenges? Rampant election spending will only compound our woes. Will the INEC invoke relevant laws on expenses of politicians and their parties?