Weekly Political Compass 2.4.24 | Deneo

Welcome to this edition of Teneo's Political Risk Advisory Board's Weekly Political Compass.

This week, we take a closer look at monetary policy Nigeria. Meanwhile, the election campaign is ending IndonesiaLeaders Russia And Turkey meet, of Argentina The Lower House will begin debating the government's reform bill of South Africa The President delivers the annual State of the Nation Address. Our map for the week is zooming in Popular support for liberal democratic institutions.

A global snapshot

Chairman of the Central Bank Nigeria (CBN), Yemi Cardoso, has given the first indication of a possible hawkish stance at the next Monetary Policy Committee (MPC) meeting scheduled for 26 and 27 February. Our West African Specialist Munchi Seto Analyzes the situation.

What inspired the comments?

Cardoso's comments came after public concerns over the naira's rapid depreciation grew. Over the past week, the currency has shed more than 10% of its value against the US dollar before valuing the NGN at 1,440/USD on the black market on February 2.

What is the policy response?

The CBN announced a series of interventions aimed at further liberalizing the exchange rate to improve market confidence and attract more FX inflows – which many financial analysts believe is responsible for the naira's weakness. Cardoso pointed out that „a lot of liquidity was pumped into the economy in a relatively short period of time.” The report clearly suggests an increase in the benchmark interest rate at the next MPC meeting.

What to see

Asia Pacific

China

As part of the Chinese automaker's plan to launch 72 satellites by 2025, Geely launched 11 satellites for use with autonomous vehicles. Separately, China Rocket Co., a privately owned company, launched nine commercial satellites on Saturday using Jialong-3, a reusable launcher that offers launch services at a competitive cost. US President Xi Jinping has called for an expansion of the commercial space industry.

Indonesia

Campaigns for the February 14 election will end on February 10, with Defense Minister Prabowo Subianto taking first place. The key question is whether he can break the majority threshold that would allow him to win next week's presidential election outright and avoid a June 26 runoff. The third and final presidential debate was held on February 4 and was more low-key than the previous two; Our view is that Prabowo's numbers are unlikely to change in either direction. Greater turnout by young voters could benefit Prabowo. There is also speculation in Jakarta that President Joko Widodo may openly endorse the defense minister if survey numbers show him one or two percentage points short of this majority. The other key data point is who his opponent will be in the second round, with survey data from the past two months showing former Jakarta governor Anis Baswedan ahead of former Central Java governor Kanjar Pranovo.

Europe

Azerbaijan

President Ilham Aliyev is set to win early presidential elections scheduled for February 7 and extend his 20-year rule for (at least) another seven years. Regular presidential elections were originally scheduled for October 2025, but the president moved the vote to an earlier date without giving a clear reason. Aliyev is widely believed to be seeking to capitalize on his increased popularity following the takeover of Nagorno-Karabakh last September. The run-up to the election was marked by a crackdown on independent and opposition-affiliated journalists, while the two major opposition parties boycotted the vote, calling it a „miracle of democracy”.

Slovakia

Prime Minister Robert Figo (Direction – Social Democracy, SMER SD) expects parliament to adopt bills to abolish the Special Prosecutor's Office (SPO) and amend the Penal Code through an expedited procedure this week. The proposed changes have sparked mass protests across the country and drawn criticism from Brussels over rule of law and corruption concerns. If accepted, President Zuzana Caputova (independent, aligned with opposition Progressive Slovakia) could send the bills back to parliament for reconsideration, but her „veto” could be overridden by a majority of MPs. The reforms could lead to the opening of an infringement procedure by the European Commission and, possibly, the suspension of EU funds.

Turkey

The pro-Kurdish People's Equality and Democracy (DEM) party is expected to name its Istanbul candidate by February 9. Unlike the 2019 local elections, the pro-Kurdish party has decided to field a candidate, which would shift the Istanbul race in favor of President Tayyip Erdogan's candidate Murat Kurum. With Kurds making up about 11% of the electorate in Istanbul, fielding a strong candidate like Basak Demirtas (wife of jailed Kurdish leader Selahtin Demirtas) would be difficult, if not impossible, for Mayor Ekrem Imamoglu to win. Second order. Regaining control of Turkey's economic powerhouse is key to Erdogan's plan to extend his grip on power.

Turkey/Russia

Russian President Vladimir Putin is expected to visit Turkey on February 12 to meet Turkish President Tayyip Erdogan. Turkey, which will be the first NATO member Putin will visit since early 2020, last month finally approved Sweden's entry into the Atlantic alliance. The two leaders last met in Sochi in September 2023. The wars in Ukraine and Gaza, Black Sea trade routes, energy and Syria will be on the agenda. Turkey has close economic ties with Russia, particularly in tourism, gas supply, grain and other agricultural trade. However, the two countries remain on opposite sides in Syria, with disagreements over the presence of outlawed Kurdistan Workers' Party (PKK) militants in northeastern Syria.

Latin America

Argentina

Beginning on February 6, the House of Commons will debate the government's omnibus reform bill. Last week President Javier Milei secured a key public vote in favor of the diluted bill with 144 out of 257 votes, a major achievement considering that the ruling Liberty Advance (LLA) party has only 37 in the lower house. However, the approval process is not complete and the next round of voting will be crucial to determine the final shape of the bill. Unofficially, some in the LLA have suggested that the process could be dragged into the second half of this week. Milei needs the bill to help convince the public that reforms are underway despite a very challenging economic backdrop; Electricity bills are expected to rise by more than 200% this month as the government cuts costly energy subsidies. Once the lower house approves the bill, it will go to the Senate, where the LLA holds just seven of the 72 seats.

Brazil

Congress resumes work this week after its summer recess, with relations with the government high on the agenda. House Speaker Arthur Lira reportedly told presidential advisers that progress on advancing government priorities in Congress is unlikely without replacing Enterprise Relations Minister Alexandre Padilla. Dissatisfaction concerns Padilla because of his key role in articulating the government with the Congress. It is a well-known fact that Congress does not want a presidential veto against the BRL 5.6 billion (US$1.14 billion) in „parliamentary amendments” – i.e. direct transfers from the government to individual parliamentarians. The veto represents about ten percent of the overall registration value approved for such amendments (BRL 53 billion or USD 11 billion). Padilha's replacement, which is unlikely to happen after more negotiations, should not stop Congress from overriding the veto unless the government comes up with an acceptable plan to restore or restructure the amendments. The congressional year begins with another episode of branch conflicts.

Middle East and Africa

Namibia

On February 4th, President Hage Gingop passed away after suffering from cancer. VP Nangolo Mbumba has replaced him, and VP Netumbo Nandi-Ndaitwah of the ruling party SWAPO has been appointed as the new vice-president. While Geingob's demise reignites factional tensions, Nandi-Ndaitwah now holds both the VP portfolios and is SWAPO's nominated presidential candidate for the November 2024 elections.

South Africa

President Cyril Ramaphosa will deliver the annual State of the Nation Address (SONA) on Thursday 8 February. While major announcements are unlikely, the address will be scrutinized for any political and policy signals ahead of the crucial 2024 election. Ramaphosa may announce an election date and clarify succession at the South African Reserve Bank.

Map of the week

Population plays an important role Not particularly supportive of the major institutions of liberal democracy, Parliaments and elections etc. This is especially important in a year when more than 40% of the world's population is eligible to vote in elections. Indifference to democratic institutions is particularly strong in some advanced economies such as India, Turkey, Mexico and Argentina, as well as in France, the United States and Italy. More interestingly, the same poll shows that younger voters around the world are more supportive of „unconcerned” leaders in elections and parliaments. At the same time, younger voters in Europe seem increasingly polarized between supporters of more far-right parties and new left, green-focused parties.