Dollar spending during elections destabilises economy

From Adanna Nnamani, Abuja

Chief Economist at SPM Professionals, Dr. Paul Alaje, has warned that the use of foreign currency, especially the dollar, during election periods contributes significantly to Nigeria’s economic instability and exchange rate volatility.

Alaje, who spoke during a presentation at the Premium Times Academy in partnership with the Central Bank of Nigeria (CBN) training themed “Business, Economy, and Financial Reporting” on Wednesday in Abuja, said the dollarisation of election spending and campaign financing had become a recurring cause of post-election economic downturns.

He explained that since 1998, election seasons in Nigeria have consistently triggered heavy dollar inflows into the local economy, leading to depletion of foreign reserves and instability in the foreign exchange market. According to him, the situation was particularly severe in 2010, 2014, and 2023, stressing that pre-election years often record high levels of economic activity due to massive spending, but are usually followed by economic decline.

Alaje blamed politicians across party lines for routinely withdrawing dollars from reserves and circulating them through Bureau De Change (BDC) operators to fund election activities, a practice he said fuels inflation, weakens the naira, and discourages investment.

He urged the Independent National Electoral Commission (INEC) and the National Assembly to enact regulations mandating that all election expenditures be made strictly in naira. He also called on the Economic and Financial Crimes Commission (EFCC) to monitor and prosecute political actors who engage in foreign currency transactions during elections.

“Immediately after the pre-election year, you start seeing the economy nose-diving. If there is a global shock, the impact becomes more severe because we have already depleted our reserves during the election year.

“If election spending is done only in naira, we will, for the first time in a long while, have a relatively stable economy after the polls,” he said.

The economist also raised concerns over Nigeria’s rising debt profile and called for stricter borrowing discipline by all tiers of government.

He said the country’s debt service-to-revenue ratio was far above sustainable levels and should not exceed one-third of total earnings.