KPMG Lowers Nigeria’s Economic Growth Forecast to 2.65%

August 29, 2023
Nigeria's economic growth

By Adedapo Adesanya

The local subsidiary of the global consultancy firm, KPMG Nigeria, has cut down its forecast for Nigeria’s economic growth rate for this year.

In its Flashnotes for August 2023, the firm now put Nigeria’s expected growth at 2.65 per cent, in contrast to an initial forecast of 2.85 per cent, the consultancy said in its latest commentary.

This came as the National Bureau of Statistics (NBS) released the country’s GDP for the three months through June (Q2 2023).

In the KPMG report signed by its chief economist (a former head of the NBS), Mr Yemi Kale, the downward review of the projection was done after it figured out that the country could not attain the estimated target initially set amid headwinds in the economy, including subsidy regime and a weakening of the Naira, which has shot up the Dollar exchange rate.

It also blamed muted government investment in the economy in Q2 and Q3 2023, with the new administrations at the federal and state levels settling in Q3 2023.

KPMG noted that the country needed a minimum 3.3 per cent growth for the second half of the year to keep alive the dream of 2.9 per cent growth for 2023.

“Q2 2023 is the quarter where the impact of subsidy removal, FX unification, and other reforms of the new administration had its major impact on squeezing household consumption demand and firms’ costs of operations as well as reduced private investment,” it said.

According to the NBS, Nigeria’s GDP expansion rate grew to 2.51 per cent in Q2, affected by further drops in oil production level and a host of economic reforms that are taking their toll on disposable income and compounding a cost-of-living crisis.

Growth was driven by the services sector, which grew by 4.42 per cent. The agricultural sector reversed its first Quarter 2023 contraction, growing by 1.50 per cent compared to -0.90 per cent in Q1 2023 and 1.20 per cent in Q2 2022.

Industry, which had reversed its seven-quarter-long contraction, growing by 0.31 per cent in Q1 2023, returned to contraction in Q2 2023, recording -1.94 per cent. Accordingly, the non-oil grew by 3.58 per cent in Q2 2023, compared to 2.77 per cent in Q1 2023, while the oil sector, which has contracted since Q1 2020, further declined by -13.43 per cent in Q2 2023 compared to -4.21 per cent in Q1 2023 and -11.77 per cent in Q2 2022.

KPMG expects oil production in Nigeria, the continent’s top producer, to shrink tighter in August and September as it did in July.

“If this trend continues for the remaining two months of Q3 2023, we will have a situation where non-oil sector growth and oil sector growth underperform,” the report noted.

“Finally, with rising inflation in the first month of Q3 2023 and our expectation of further increases in inflation for the rest of the year, the pressure on nominal to real GDP will be higher, thereby curtailing higher real GDP growth in Q3 2023,” it added.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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