By Aduragbemi Omiyale
An audit, tax and advisory firm, KPMG Nigeria, has noted that the Nigerian government may have to borrow more or increase its tax net to achieve its short-term growth strategy.
The company said this in its latest Macroeconomic Snapshot, which looked into the 6 per cent gross domestic product (GDP) growth target set by President Bola Tinubu in the next four years.
KPMG Nigeria submitted that this goal is unachievable, going by some parameters currently on the group.
“The president, during his inauguration speech, had set a target to increase the GDP growth rate of the country by 6 per cent on average in the next four years through budgetary reforms aimed at stimulating the real sector of the economy. However, we are of the opinion that this might be difficult to attain in four years,” the firm said in the report.
It stressed that, “While we expect stronger year-on-year growth over the next few years, we are of the opinion that there is very limited space to attain a 6 per cent average real growth rate in 4 years or an increase in real GDP by N17 trillion.
“We are of the opinion that an average GDP growth rate of between 4 per cent to 4.5 per cent at best is more feasible in the next four years. Even this will require the country to get its policies right and keep consistent faith with macroeconomic reforms.”
KPMG Nigeria said, “The government’s major short-term growth strategy will be to boost government investment and government expenditure (accounting for about 15 per cent of GDP combined) to attempt to unlock the potential of the private sector and stimulate domestic consumption and exports.
“It may, therefore, have no option than to borrow more and/or increase tax collection given the low fiscal space and despite the already high debt and debt service environment of above 50 per cent even after subsidy removal.
“This may, however, constrain GDP growth in the short term by squeezing households and businesses; this further indicates that 6 per cent on average in 4 years is unlikely.”
It disclosed that Nigeria’s growth since 2019 has been fragile, not growing fast enough to contain population growth (2.6 per cent to 3.0 per cent) and needs to be less inequitable (with a Gini coefficient of 35.1 per cent in 2022).
“Accordingly, per capita income has contracted by over 40 per cent since 2015.”
