The Chief economist of KPMG Nigeria, Mr. Oyeyemi Kale, has predicted that the Central Bank of Nigeria’s (CBN) Naira redesign policy will drag the country’s Gross Domestic Product (GDP) down in the first quarter (Q1) of 2023.
Kale estimated that the Nigerian GDP, which stood at N198 trillion in 2022, will lose about N10 trillion to N15 trillion as a result of the Naira scarcity induced by the CBN policy.
He made the projection in a series of tweets on Tuesday. He wrote, “I am estimating a reduction in Q1 2023 nominal GDP by between N10-15 trillion due to challenges sourcing cash in Q1 2023.”
The former Statistician General of the National Bureau of Statistics (NBS) further said: “This is because about 40 percent of Nigeria’s N198 trillion GDP in 2022 is informal of which about 90 percent is cash-based. Further 30 percent of formal sector GDP is cash-based. This means N106.9 trillion of the total, too, is cash-based.
“There is nothing new or wrong about currency redesign or cashless policy if done for the right reasons and at the right time. But every policy will have pros and cons and will benefit some but not others. There is no policy that won’t affect someone negatively. Or that won’t have costs.
“Of the 46 economic activities, agriculture, some manufacturing activities (especially food and beverage, textiles, apparels), trade, arts entertainment and recreation, accommodation and food services, road and water transport and other services are expected to be the most affected.
“The idea is to do a cost-benefit analysis looking at the overall impact of any policy and how and when it is to be implemented, across the economy and not just in one or a few areas and deciding if overall, the benefits outweigh costs. If yes, then the costs are acceptable.”
Kale urged policymakers to always cushion the negative result of their policies by making palliatives available
“A policymaker can or should introduce palliatives to make the costs bearable to those that will be negatively affected by its implementation.
“If the result of analysis is the implementation of the policy and its implementation will be more detrimental to the entire system than beneficial even if it benefits a particular area or sector then it clearly isn’t a good idea to go ahead.”