As political spending builds ahead of 2027, analysts warn that excess liquidity could threaten Nigeria’s fragile reform gains and that the naira, inflation, and governance priorities may rise, writes Festus Akanbi

As Nigeria edges closer to the 2027 elections, economists and market watchers warn that the nation may soon enter a familiar yet dangerous economic cycle in which political spending overwhelms reform discipline, injects excess liquidity into the system, and diverts official attention from real governance to electoral survival.

The concern Is that while election seasons traditionally stimulate pockets of commercial activity, they also distort macroeconomic management, weaken monetary controls, pressure the naira, and push core governance priorities to the margins.

The warning has already come from the Central Bank of Nigeria (CBN) itself. Governor of the bank, Mr. Yemi Cardoso, recently cautioned that election-year spending poses a major threat to the fragile gains of current reforms, noting that excessive liquidity in the financial system could destabilise inflation, exchange rates, and investor confidence if not properly managed.

He disclosed that previous interventions of about N10.93 trillion had provided temporary relief but left behind structural distortions and higher liquidity-management costs.

The concern is not theoretical. A Lagos-based financial expert, Mr. Stephen Ogunshola, maintained that Nigeria’s electoral cycles have historically coincided with heavy cash injections into the economy as politicians mobilise resources for party primaries, delegate inducements, campaign logistics, and voter outreach.

“In practical terms, this means large sums, often warehoused in banks or held in dormant accounts by political actors, re-enter circulation within a compressed period, expanding the money supply in ways that conventional monetary models struggle to predict”, he stated.

Analysts say the 2027 cycle may be more disruptive than previous ones because of the desperation already building within the political class and the sharp rise in campaign finance limits under the Electoral Act 2026.

The revised law now permits presidential candidates to spend up to N10billion, double the previous limit, while individual donor caps have risen tenfold to N500 million. Governorship, legislative, and local election ceilings have similarly increased.

But in Nigeria’s political culture, formal limits rarely capture actual spending. During previous primaries, particularly in the run-up to the 2023 elections, reports of delegates receiving thousands of dollars were widespread.

Some accounts alleged payouts as high as $25,000 per delegate during presidential nomination contests. While many such claims remain anecdotal, analysts say the broad pattern is undeniable: party primaries have become heavily monetised contests in which aspirants outspend one another in a race for political survival.

The macroeconomic consequence is often immediate. As politicians convert naira into dollars to finance inducements and campaign-related transactions, demand for foreign exchange rises sharply. This has historically placed pressure on the naira, widened spreads between official and parallel markets, and undermined confidence in exchange-rate stability.

In the lead-up to the 2023 elections, heavy political dollar demand contributed to severe distortions in the forex market, with the naira falling sharply in the parallel market amid widespread dollar hoardings.

That risk is re-emerging at a delicate moment for the economy.

After months of painful reforms, tighter monetary policy, and exchange-rate liberalisation, Nigeria has begun to see modest signs of macroeconomic stabilisation. Inflation has eased from its earlier peaks, the naira has recovered some ground, and aggregate money supply growth has moderated. But analysts warn that politically induced liquidity injections could reverse those gains if not contained.

Beyond monetary instability, the election cycle may also redirect state attention and public spending away from substantive governance. Historically, pre-election periods in Nigeria have tended to see a surge in politically visible capital projects, ceremonial project launches, and constituency-targeted spending, often driven more by electoral optics than by economic rationality.

While this may temporarily stimulate sectors such as construction, media, printing, event logistics, security, and advertising, economists note that the quality of such spending is often poor and its developmental value is limited.

At the same time, politically inconvenient but socially critical obligations can suffer neglect.

Stakeholders fear that less politically rewarding priorities, including reforms in power distribution, long-delayed payments to Nigerian scholars on foreign scholarship schemes, social intervention obligations, and institutional reforms; could be deprioritised as the political class shifts focus to campaign preparation and coalition-building. In effect, governance risks are becoming subordinated to politics.

The concern Is particularly acute because Nigeria’s election cycles increasingly begin long before the formal campaign season. With party primaries expected well ahead of the 2027 vote, many aspirants are already building war chests, cultivating delegates, and activating patronage networks. This means the liquidity effects could begin to manifest months before general campaigns officially commence.

Still, not all effects are negative. Election cycles do stimulate economic activity in selected sectors. Media houses often benefit from advertising windfalls. Printing and branding firms record increased demand for campaign materials.

Security contractors, transport operators, hotels, event planners, digital media consultants, and merchandise suppliers all experience business surges. Hospitality and aviation sectors also typically see elevated patronage as politicians, aides, and delegates move around the country.

Yet economists caution that such gains are largely transactional and temporary. They do not necessarily translate into productivity growth or long-term investment. Instead, they often represent a redistribution of liquidity rather than the creation of durable economic value.

The deeper concern Is that excessive political spending entrenches a dangerous political economy logic: office becomes an investment to be recouped. Anti-corruption experts have repeatedly linked high campaign expenditure to governance failure, arguing that politicians who spend heavily to secure office may feel pressured to recover those investments through inflated contracts, patronage networks, and public resource extraction once elected.

That dynamic, analysts say, partly explains why Nigeria’s election seasons often produce post-election governance deficits.

The challenge for policymakers is that controlling politically driven liquidity is far more difficult than managing ordinary market conditions. Unlike conventional fiscal or consumer spending, election-related expenditure is opaque, impulsive, and frequently conducted outside formal channels. It often bypasses banking systems, relies on cash movements, and is shielded by political influence.

This is why analysts argue that preserving economic stability through the 2027 cycle will require unusual institutional discipline.

First, the CBN may need to maintain tighter liquidity management and closely monitor unusual cash and forex movements as primaries approach. Second, anti-corruption and financial intelligence agencies may need to intensify surveillance of suspicious financial flows, particularly large cash withdrawals and politically linked foreign exchange transactions.

Third, INEC and the judiciary face renewed pressure to enforce campaign finance laws more credibly than in previous cycles, when legal spending limits have largely existed on paper.

Ultimately, however, the broader issue is structural: Nigeria’s political economy remains deeply monetised, and until those changes, every election cycle will continue to threaten macroeconomic stability.

As the 2027 contest gathers momentum, the greatest risk may not be the temporary liquidity surge itself, but the possibility that politics once again overwhelms policy, stalling reforms, distorting markets, and shifting the machinery of state from economic management to electoral calculation.

For an economy only beginning to emerge from a painful adjustment period, that would be a costly relapse. (THISDAY)

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