Dr. Paul Alaje, an expert on economic policy, has cautioned that the unchecked influx of cash during election cycles is directly related to Nigeria’s ongoing inflationary pressures and post-election economic instability. Speaking during a two-day training session at the Premium Times Training Academy in Abuja, the Chief Economist claimed that political spending patterns have consistently eroded the country’s reserves and caused exchange rate instability.
According to Alaje, who provided a thorough study of Nigeria’s fiscal vulnerabilities, years of excessive borrowing without commensurate economic growth have caused Nigeria’s debt service ratio to soar well over acceptable international standards.
He claims that for the past ten years, Nigeria’s borrowing rate has increased by an average of 20% per year, while economic growth has stayed at 3%, indicating that loans taken out during that time have had no discernible effect.
“We shouldn’t pay off debt with more than one-third of our whole income. Nigeria is significantly more than the guideline, which should be about 33.3%, he stated.
“The impact on the economy should result in at least 6-7% GDP growth if you borrow at a rate of 20%. However, for a long time, we have been recording less than 3%.
Alaje attributed the lackluster effect of borrowing to inefficient use of loan profits, claiming that too much of Nigeria’s debt-funded spending is diverted through corruption or goes into ongoing operations or administrative costs rather than being used for profitable capital projects.
In order to improve borrowing circumstances, he encouraged the National Assembly to make sure that any additional federal or state loans flow directly into capital projects that have already been approved and have the potential to boost the economy.
He stated, “We are borrowing to fund consumption, not production, if our revenue projections cannot cover recurrent expenditure.”
There are still administrative components in our capital expenditures that do not correspond to infrastructure. Roads, railroads, and other vital infrastructure that boosts productivity should be the only uses for borrowing.
He pointed out that Nigeria’s goal of having a $1 trillion economy by 2030 will necessitate 15–17% annual GDP growth, which can only be achieved if borrowing is linked to extensive infrastructure that boosts productivity both nationally and regionally.
Heavy dollar withdrawals and political cash transfers during election years, according to Alaje, are to blame for Nigeria’s frequent currency crises. Since 1999, this practice has exacerbated inflation and devalued the naira following each election cycle.
I have been monitoring election spending since 1998. “During campaigns, dollar flows into the economy always spike,” he stated.
“2010, 2014, and 2023 were the worst years. Politicians destabilize the currency rate by taking dollars out of the reserves and pumping them into the Bureau de Change market. The economy starts to plummet following elections.
Due to large financial infusions by political players, he continued, the pre-election year frequently records the fastest economic growth. However, Nigeria sees slowdown, instability, and inflation rises just after elections, which are exacerbated by worldwide economic shocks.
“Prohibit Dollar Election Spending”
Alaje suggested a severe legal prohibition on the use of foreign currency in political campaigns in order to lessen the harm.
He declared, “The National Assembly and INEC must mandate that all election expenditures be made in naira.”
“The EFCC ought to have the authority to monitor and prosecute anyone who spends money on elections.” After the elections, we can only stabilize the economy in this way.
Alaje added that coordinated regional economic zones, such as those in the Southwest and North-Central, would spur rapid industrialization akin to China’s growth model and urged governors to imitate the infrastructural expansion saw in Lagos and Abuja throughout the country.
