Nigeria: Government wins regional vote in litmus test ahead of February elections

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Growth is expected to have picked up the pace in the second quarter, after losing steam at the start of the year. The PMI came in at a historic high in June, rounding out the strongest quarter the index has ever recorded. In addition, firmer oil prices are supporting the energy sector and helping the government build international reserves—which hit the highest level in five years in June—to support its exchange rate regime. On the political front, Nigeria’s All Progressives Congress, the ruling party, unseated the opposition in regional elections in Ekiti state on 14 July.

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The result bodes well for President Muhammadu Buhari’s reelection bid, as the vote was regarded as a test of the electorate’s mood ahead of presidential and parliamentary votes in February. Political uncertainty had risen after a faction from within the ruling party splintered away at the start of July, declaring it no longer supports Buhari and will challenge him in next year’s election.

Higher oil prices, improved liquidity and increased public spending in the run-up to the 2019 elections should fuel faster growth this year. However, political uncertainty, as well as security concerns, continues to pose risks to economic activity. FocusEconomics panelists expect GDP to increase 2.4% in 2018, which is down 0.1 percentage points from last year’s projection. Next year, growth is seen rising to 2.9%.

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