20110401
Reuters
LAGOS (Reuters) - Election spending in Nigeria boosted demand for new vehicles in January and February, with car imports rising for the first time in 18 months as political parties splashed out on vehicles for their campaign tours.

Port figures showed new vehicle imports rose to 7,956 units in January and February combined, up 58 percent on the same period of last year, according to Mohan Sethi, general manager at Dana Motors, which imports Kia vehicles to Nigeria.

Consumers shied away from big-ticket purchases after credit dried up in sub-Saharan Africa's second biggest economy in the wake of a $4 billion central bank bailout of nine banks in 2009.

But with political parties spending heavily in the run-up to presidential, parliamentary and state governorship elections which begin on Saturday, dealers have seen orders recover.

"In the past few months, we've received a lot of orders from political parties," said one dealer, asking not to be named.

The main parties have spent the past few months touring Africa's most populous nation ahead of the elections, sparing no expense on everything from branded biscuits to jeeps.

Government spending has also gone into overdrive, rising 50 percent last year to its highest level ever. Parliament this month passed a 2011 budget which keeps spending at around 5 trillion naira again, undermining the finance ministry's efforts to restore fiscal discipline.

More than half of the planned spending is recurrent expenditure, which includes new vehicles for ministries and government agencies.

Vehicle sales in Africa's most populous nation are a proxy measure for private purchasing power, a leading economic indicator which is not formally available in Nigeria.

Vehicle imports grew steadily to an annual peak of 75,000 units by the end of 2008, almost double the level of two years earlier as banks offered credit aggressively to a growing middle class for everything from refrigerators to equities.

But imports went into a steady decline afterwards, falling 40 percent in 2009 and 18 percent last year.

Dealers say orders could return to 2008 levels if elections go smoothly, ending the immediate political uncertainty, and consumer finance kicks off again.

Banks have started to repair their balance sheets after heavy write-downs and loan loss provisions following the bailout, according to the seven who have so far published audited accounts for 2010, and have pledged to restore lending.

Stanbic IBTC, which is looking to grow its asset finance business, said this month the banking sector could see 20-25 percent loan growth over the next 3-5 years as demand for both consumer and infrastructure finance increases