…Says political transition, naira redesign responsible
Nigeria’s Gross Domestic Product will grow at a relatively slow pace of 3 per cent in 2023 due to challenges associated with the naira redesign and political transition, a report by KPMG has stated.
The multinational consulting firm, in its newly released ‘2023 Global Economic Outlook’, said an expected slowdown in the global economy and its trade and financial flows implications are likely to drag on the country’s GDP, which recorded eight consecutive quarters of growth, following its exit from the pandemic-induced recession in 2020.
The Nigerian economy ended the past year with a GDP growth rate of 3.52% in Q4 2022 compared with 2.25% in Q3 2022 with growth averaging 3.10% over 2022.
The report also noted that key non-oil sectors such as manufacturing, trade, accommodation and food services will be negatively affected by the naira redesign policy introduced by the Central Bank of Nigeria in the last quarter of 2022.
The PUNCH reports that in October 2022, the CBN Governor, Godwin Emefiele, announced plans to redesign the old N200, N500 and N1,000 notes which sparked widespread condemnation by economists, politicians and other relevant stakeholders.
Part of the report read, “We expect Nigeria’s GDP to continue to grow at a relatively slow pace of 3% in 2023 due to the slowdown in economic activity that typically characterizes periods of political transition in Nigeria.
“Furthermore, the spillover from an expected slowdown in the global economy in 2023 and its trade and financial flows implications are expected to drag on GDP.
“Consequently, growth will be negatively affected by the Naira Redesign Policy introduced in Q4 2022 and Q1 2023 and its implications on key non-oil sectors like manufacturing, trade, accommodation and food services, transportation and other services, further slowing down overall GDP growth in 2023.”
The report further projected that the incoming administration of the President-elect, Bola Tinubu, will have to contend with challenges characterised by fragile and slow economic growth and challenges in the foreign exchange market adding that government revenue may remain inadequate to support much-needed expenditure.
“A new government is set to take over from the current administration in May 2023. It will, however, face a deeply rooted challenging environment, characterised by fragile and slow economic growth and challenges in the foreign exchange market. Additionally, government revenue remains inadequate to support much-needed expenditure, leading to a high debt stock and high debt service payments.”
The report also noted that the oil sector contracted by 19.22 per cent, due to pipeline vandalism, oil theft, low investment, and other operational challenges. As a result, oil production dropped from 2.07 million barrels to 1.0 million barrels.
Commenting on the report, the Global Head of Clients & Markets, KPMG International, Regina Mayor, said, “The phrase that has overwhelmingly dominated conversations – from boardrooms to political chambers and main streets has been the cost-of-living crisis. The impact of such a lengthy period of uncertainty is being felt by everyone and that’s reflected in KPMG’s latest Global Economic Outlook.”