Olusegun Obasanjo
Transfer of power

The military government has assembled a constituent drafting committee to devise a new constitution which could be used amid a transfer to civilian rule. The committee argued that Nigeria should change its governance system, which was based on the British parliamentary system, to one based on the U.S. presidential system whereby a single elected president would be both head of state and head of government. To avoid this president becoming a dictator, as had happened elsewhere in Africa, it argued for various checks on their power, including a federal structure whereby independent elected institutions would exist at the federal, state, and local level. The draft constitution was published in October 1976 and debated in public for the following year. A constituent assembly met to discuss the draft in October 1977. The assembly deadlocked over what role to give sharia law in the constitution. Obasanjo called the assembly together and warned them of the social impact of their decision, urging them to take a more conciliatory attitude. In September 1978, the Supreme Military Council announced the new constitution; it had made several amendments to the version put forward by the constituent assembly.

Along with the new constitution, Obasanjo lifted the ban on political parties. A variety of groups then formed to compete in the ensuing election, most notably the Unity Party of Yoruba, the Nigerian People's Party, and the National Party of Nigeria. Obasanjo was angered that many of the politicians were making promises that they could not keep. The elections took place over the course of July and August 1979. Turnout was low, at between 30 and 40 percent of legally registered voters, and there was rigging on various sides, although it was peaceful. There was debate as to who won the presidential vote, and Obasanjo refused to adjudicate, insisting that the Electoral Commission take on that role. They declared that Shehu Shagari was the winner, something that the runner up, Obafemi Awolowo, unsuccessfully challenged at the Supreme Court. Shagari took office in October 1979; at his inauguration ceremony, Obasanjo presented Shagari with a copy of the new constitution. This marked the start of Nigeria's Second Republic.

Obasanjo's role in returning Nigeria to civilian rule would form the basis of the good reputation he retained for the next two decades. However, various domestic and foreign individuals, including the Zambian President Kenneth Kaunda and Togo President Gnassingbé Eyadéma, urged him to remain in power. His refusal to back Awolowo, a fellow Yoruba, earned him the enmity of much of the Yoruba elite. Awolowo accused Obasanjo of orchestrating Shagari's victory, something Obasanjo strenuously denied.
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