Nigeria’s headline inflation rate has been tipped to hit 30 per cent by December 2023, global financial advisory service firm, Klynveld Peat Marwick Goerdeler (KPMG) has predicted.
KPMG in its macroeconomic review for the first half of 2023 and outlook for the year’s second half (H2) noted that recent reforms in the petroleum industry (like the fuel subsidy removal) and unification of the foreign exchange market will be responsible for the projected spike in prices of goods and services.
The report reads: “We anticipate that the current inflationary pressure in the economy will persist into H2 2023… Specifically, our model suggests that the combined influence of fuel subsidy removal and foreign exchange liberalisation may drive headline inflation to about 30% by December 2023.”
On how to control inflation, the report explained that the current MPR hike being adopted by the apex bank in the last 18 months has proven ineffective in stalling the increasing inflationary trend. However, it advised that addressing issues such as energy and transportation costs, supply chain problems, and boosting local production will be more effective than increasing interest rates.
The report also projected that Nigeria’s economy will grow by 2.6% in 2023- a considerable reduction from the World Bank’s projection of 2.8% in 2023 and that the recent reforms from President Bola Tinubu such as fuel subsidy removal and unification of the FX market will lower GDP growth in the country.
The report reads, “We expect the Nigerian economy to grow by 2.6% in 2023, lower than the revised World Bank’s 2023 forecast of 2.8% for Nigeria and the 3.1% growth rate achieved in 2022.”
The report also explained that recent macroeconomic malaise during the first half of the year such as the failed naira redesign policy, weak growth because of low crude oil output, high inflation, the fuel subsidy removal and devaluation of the naira will have negative ripple effects in the second half of the year.