FACTBOX-Key political risks to watch in Nigeria

By Nick Tattersall

LAGOS, May 4 (BestGrowthStock) – A rift in Nigeria’s ruling party
ahead of presidential polls, resurgent crime in the Niger Delta
oil region and tough financing conditions for businesses and
consumers are clouding an otherwise bright investment outlook.

Africa’s most populous nation is a compelling frontier
market and some foreign investors are slowly returning to its
capital markets, but its volatile politics with elections due by
early next year means many remain on the sidelines for now.

Following are some of the factors investors are watching.

RULING PARTY PRIMARIES

The ruling People’s Democratic Party (PDP) has dominated
politics since Nigeria’s return to democracy just over a decade
ago, with its nominee winning all three presidential races since
then and its members holding strong parliamentary majorities.

There is disagreement over who its candidate for the next
election should be, raising the prospect of fiercely contested
primaries, or even a split in the party which could lead to the
presidential election being more than a one-horse race.

President Umaru Yar’Adua, who returned from a Saudi hospital
in February, remains too sick to rule and is unlikely to seek a
second term.

PDP Chairman Vincent Ogbulafor has said the party nominee
should be from Yar’Adua’s Muslim north, abiding by the terms of
an unwritten agreement in the party that power rotates between
north and the mostly Christian south every two terms.

But Acting President Goodluck Jonathan, a southerner, has
not ruled himself out of the race and some northerners have said
they would support him.

Ogbulafor’s position looks precarious after corruption
charges were filed against him and a faction of the party, later
suspended, launched a rebellion. [ID:nLDE63P1UZ]

Some senior PDP figures have privately warned that a
Jonathan candidacy would split the party. Former military ruler
Ibrahim Babangida and former Vice President Atiku Abubakar have
both said they want the PDP nomination. [ID:nLDE63B0Y9]

What to watch:

— Elections brought forward. Nationwide polls, including
the presidential race, are due by April 2011 but could be
brought forward to as early as late this year if reforms before
parliament are passed. That could mean the key ruling party
primaries taking place as early as August. A smooth early
election would end the current uncertainty and allow investors
to look forward to the new administration’s policy direction.

— Growing support for a Jonathan candidacy. Jonathan has
not ruled out contesting the polls but wants at least three
months to see how reforms take hold first. Campaign posters
appeared in his support around Abuja, but Jonathan’s office said
they were not authorised by him. [ID:nLDE63O059]

Should Jonathan make progress on reforms in coming months,
investors may welcome the consistency in policy a Jonathan
presidency would bring.

— Yar’Adua dies or is declared incapacitated. If a two
thirds majority of Jonathan’s new cabinet declares Yar’Adua
permanently unfit to rule, and a medical panel supports this
view, he ceases to hold office.

This would mean Jonathan being sworn in as substantive
president and the appointment of a new vice president, likely to
be a northerner who could go on to be the ruling party candidate
in the next elections. [ID:nLDE5BF1G3]

POLICY MOMENTUM

Jonathan appointed a new cabinet in April which his
supporters say will enable him to move ahead with priorities
including electoral reform, maintaining peace in the Niger
Delta, tackling corruption and providing more reliable
electricity supply. [ID:nLDE63209J]

But critics are concerned the new ministers — including
Finance Minister Olusegun Aganga, a former Goldman Sachs (GS.N: )
executive, and Diezani Allison-Madueke, Nigeria’s first female
oil minister — could take time to get to grips with their new
roles, slowing government business down.

With elections due in less than a year, the administration
has limited time to accomplish all this.

What to watch:

— Electoral reforms. Legislation before parliament is
supposed to help Nigeria avoid a repeat of the chaotic polls
that brought Yar’Adua to power in 2007, marred by widespread
ballot-stuffing and voter intimidation.

The widely criticised Independent National Election
Commission Chairman, Maurice Iwu, who oversaw the 2007 polls,
has been dismissed in a move seen as vital for electoral reform.

— Petroleum Industry Bill. Wide-ranging overhaul of the
energy industry which will redefine Nigeria’s relationship with
foreign partners. It is touted by government as the solution to
everything from funding shortfalls for exploration and
production projects to budget-debilitating fuel subsidies,
although some in the oil industry fear it will make Nigeria less
competitive as an investment destination.

— Banks reforms. The central bank badly needs a bill before
parliament passed to create an asset management company to soak
up bad loans, freeing up bank balance sheets so they can start
lending again. This would also make rescued banks more
attractive to new investors and support market confidence.

Investment Basics

FACTBOX-Key political risks to watch in Nigeria