The Nigerian economy is facing significant challenges with the unemployment rate projected to reach 40.6% in 2023, according to the KPMG Global Economy Outlook report released recently.
Nigeria’s unemployment rate grew steadily from 23.1% recorded in 2018 to 33.3% in 2022.
The report attributed this to slower-than-expected economic growth and the inability of the economy to absorb the 4-5 million new job seekers that enter the labour market every year.
Also, KPMG predicts that the incoming administration will face a deeply rooted challenging environment, characterized by slow economic growth and challenges in the foreign exchange market.
The report further notes that government revenue remains inadequate to support much-needed expenditure, leading to a high debt stock and high debt service payments.
The firm projected that the unemployment rate will grow to 43% in 2024 while inflation will accelerate to 20.3% in 2023 and 20.0% in 2024.
The spillover from an expected slowdown in the global economy in 2023 and its trade and financial flows implications would also drag on Gross Domestic Product.
Despite these challenges, KPMG expects the telecommunications and trade services sectors to recover, as well as an expected recovery in the oil sector, driven by measures being taken to tackle security issues.
The non-oil sector grew by 4.84%, while the oil sector contracted by 19.22% in 2022, mainly attributed to worsening oil theft, pipeline vandalization, underinvestment, and other operational challenges inhibiting oil production.
To combat rising inflation, the Central Bank of Nigeria raised the monetary policy rate by a cumulative 500 basis points in 2022, to 17.5%, and increased the cash reserve ratio from 27.5% to 32.5%.
However, despite these aggressive rate hikes, inflation has remained stubbornly high and is predicted to remain above 20% in 2023, due to the persistence of structural and policy issues.
The KPMG report highlights the need for urgent action to address the country’s high unemployment rate and other economic challenges.
It suggests that the incoming administration must prioritize investments in the private sector, industrialization, and economic growth to create job opportunities and support the economy.
