To Preserve Monetary Policy Gains, Analyst Urges Politicians to Stop Dollar Spending at Elections

• Says action stokes inflation, FX instability, tasks National Assembly, INEC, EFCC to boost monitoring, enforcement

James Emejo in Abuja

Chief Economist at SPM Professionals, Dr. Paul Alaje, yesterday urged politicians to desist from “sharing” the dollar in the pre-election season to preserve the recent achievements in monetary policy administration.

Alaje spoke at the Premium Times Academy training, with the theme, “Business, Economy, and Financial Reporting,” organised in partnership with Central Bank of Nigeria (CBN) in Abuja.

Alaje warned that the dollarisation of the economy could stoke inflation and erode monetary policy gains so far achieved in CBN’s inflation-targeting interventions.

In an interview with THISDAY, Alaje said, “Over the years — since 1998 — I have tracked election spending closely. A lot of money flows into the economy during election cycles, particularly in foreign currency (dollars).

“The situation was especially bad in 2010 and 2014, and we saw a similar trend in 2023. Each time, there’s a surge of dollar inflows into the system, and the economic impact becomes evident after the election year.

“Typically, the pre-election year records higher economic growth due to spending activities, but immediately after the election, the economy declines sharply.”

According to him, politicians often make massive withdrawals, convert funds into dollars, and push them into Bureau De Change (BDC) markets, fuelling exchange rate instability and inconsistency.

Alaje called on the National Assembly, Independent National Electoral Commission (INEC), and Economic and Financial Crimes Commission (EFCC) to boost monitoring mechanisms  to address the menace in the interest of the economy.

He said, “And if, during that same period, there is a global economic shock, Nigeria feels the impact even more severely because our reserves are already depleted.

“Why? Because during election years, politicians make massive withdrawals, convert funds into dollars, and push them into Bureau De Change (BDC) markets. This fuels exchange rate instability and inconsistency.

“This issue cuts across all political parties — it’s not limited to one.”

Alaje said the National Assembly and INEC should establish clear rules to curb dollar spending by politicians.

According to him, “If campaign spending is to be done, whether within or beyond INEC’s approved limits, it must be done in Naira only.

“The EFCC should also be empowered to monitor and prosecute anyone who spends foreign currency during elections.

“If we enforce that, then for the first time in a long while, Nigeria could experience a relatively stable economy even after an election year.”