KPMG, a global professional services firm, has projected that Nigeria’s headline inflation is expected to soar to 30 percent by December 2023, attributing this anticipated surge to recent policy reforms, including the removal of fuel subsidies and the unification of the foreign exchange market. The firm shared these insights in its macroeconomic review for the first half of 2023, alongside projections for the remainder of the year.
As of September, Nigeria’s current headline inflation rate stood at 26.72 percent, according to data from the National Bureau of Statistics.
KPMG’s analysis suggests that the combined impact of fuel subsidy removal and foreign exchange liberalization may drive headline inflation to the 30 percent mark by the end of 2023. The report critiques the efficacy of the Central Bank of Nigeria’s (CBN) Monetary Policy Rate (MPR) hikes over the last 18 months, stating that these measures have proven ineffective in curbing the rising inflationary trend.
The report offers alternative solutions to address inflation, emphasizing the need to tackle issues such as energy and transportation costs, supply chain challenges, and the promotion of local production. KPMG suggests that these measures would be more effective than solely relying on interest rate adjustments.
Furthermore, the report forecasts that Nigeria’s economy will experience a growth rate of 2.6 percent in 2023, marking a significant reduction from the World Bank’s initial projection of 2.8 percent for the same period. President Tinubu’s recent reforms, including fuel subsidy removal and the unification of the foreign exchange market, are predicted to contribute to a lower GDP growth in the country.
The report highlights macroeconomic challenges faced in the first half of the year, including the unsuccessful naira redesign policy, sluggish growth due to low crude oil output, elevated inflation, and the repercussions of fuel subsidy removal and naira devaluation. These challenges are anticipated to continue affecting the Nigerian economy in the second half of 2023.
Nigeria has witnessed a continuous surge in inflation over the past nine months, reaching a two-decade high of 26.72 percent in September. Analysts attribute this record inflation to President Tinubu’s fuel subsidy removal and currency market reforms. The KPMG report underscores the importance of addressing these economic challenges for sustainable growth in the coming months.