* New govt to face huge challenge on forex mgt
Nigeria’s Gross Domestic Product (GDP) will grow at a slow pace of 3 percent in 2023, Klynveld Peat Marwick Goerdeler (KPMG) has predicted in its latest report.
The report released on Tuesday, titled ‘Global Economic Outlook – H1 2023’, pointed to the slowdown in economic activity during political transitions in Nigeria as a major contributing factor to the slow growth.
KPMG noted that despite aggressive rate hikes to curtail inflation, it has remained stubbornly high. It, however, is predicted to remain above 20 percent in 2023 due to the persistence of structural and policy issues.
While noting the National Bureau of Statistics (NBS) recorded an increase in the national unemployment rate from 23.1 percent in 2018 to 33.3 percent in 2020, KPMG said: “We estimate that this rate has increased to 37.7 percent in 2022 and will rise further to 40.6 percent in 2023.″
It also noted that the new government, which is set to take over from the current administration in May 2023, will face significant challenges in the foreign exchange market, a situation that will lead to slower economic growth.
The report also hinted that government revenue remains inadequate to support much-needed expenditure, leading to a high debt stock and high debt service payments.
Part of the report reads: “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.
“Additionally, 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 Nigerian economy ended the past year with a GDP growth rate of 3.52 percent in Q4 2022 compared with 2.25 percent in Q3 2022, with growth averaging 3.10 percent over 2022. This represents eight consecutive quarters of growth, following its exit from the pandemic-induced recession in Q3 2020.
“Growth in 2022 was driven by the non-oil sector, as continuous recovery in household consumption boosted spending, particularly in the finance and insurance services, telecommunications, and transportation and storage services.
“While the non-oil sector grew by 4.84 percent, the oil sector contracted by 19.22 percent, largely attributed to worsening oil theft, pipeline vandalization, underinvestment, and other operational challenges inhibiting oil production.
“Nevertheless, we expect telecommunications, trade services, as well as an expected recovery in the oil sector, on account of measures being taken to tackle security issues, to drive our forecast of 3 percent growth in 2023.
“Headline annual inflation maintained its upward trend throughout 2022, reaching its highest levels in almost two decades and closing the year at 21.34 percent, with food inflation and core inflation growing by 23.75 percent and 18.49 percent respectively.
“Unemployment is expected to continue to be a major challenge in 2023 due to the limited investment by the private sector, low industrialization and slower than required economic growth and consequently, the inability of the economy to absorb the 4-5 million new entrants into the Nigerian job market every year.”