Leading audit and advisory firm KPMG has released a macroeconomic review for the first half of 2023, forecasting that Nigeria’s headline inflation is poised to escalate to 30 percent by December.
The anticipated surge is attributed to recent economic reforms, including the removal of fuel subsidies and the unification of the foreign exchange market.
According to KPMG, “Specifically, our model suggests that the combined influence of fuel subsidy removal and foreign exchange liberalisation may drive headline inflation to about 30 per cent by December 2023.”
As of September, Nigeria’s current headline inflation rate stands at 26.72 percent, as reported by the National Bureau of Statistics.
The report addresses the challenges of inflation control, emphasizing that the current Monetary Policy Rate (MPR) hikes by the central bank have been ineffective.
Instead, KPMG recommends a focus on resolving issues such as energy and transportation costs, supply chain challenges, and promoting local production as more effective measures than further interest rate increases.
The review also projects a 2.6 percent growth in Nigeria’s economy for 2023, a notable reduction from the World Bank’s forecast of 2.8 percent.
The report suggests that recent reforms by President Tinubu, such as fuel subsidy removal and FX market unification, may contribute to lowering the country’s GDP growth.
The report concludes that challenges faced in the first half of the year, including an unsuccessful naira redesign policy, sluggish growth due to low crude oil output, elevated inflation, and economic reforms, are expected to have adverse effects in the latter half of the year.
Nigeria’s persistent inflation over the past nine months is linked to President Tinubu’s fuel subsidy removal and currency market reforms.