Global financial advisory service firm, Klynveld Peat Marwick Goerdeler (KPMG), has predicted that Nigeria’s headline inflation rate could reach 30% by December 2023.
KPMG attributes this projected spike in prices of goods and services to recent reforms in the petroleum industry, such as the removal of fuel subsidies, and the unification of the foreign exchange market.
The report indicates that the combination of fuel subsidy removal and foreign exchange liberalization may contribute to persistent inflationary pressure in the economy in the second half of 2023.
KPMG’s review suggests that the current Monetary Policy Rate (MPR) hikes adopted by the central bank in the last 18 months have not effectively curbed the increasing inflationary trend. Instead, the report recommends addressing issues such as energy and transportation costs, supply chain problems, and boosting local production as more effective measures than increasing interest rates.
In addition to the inflation prediction, the report forecasts that Nigeria’s economy will grow by 2.6% in 2023, which is a reduction from the World Bank’s projection of 2.8% for the same period.
The report attributes this lower growth rate to recent reforms, including the removal of fuel subsidies and the unification of the foreign exchange market. It also highlights macroeconomic challenges faced during the first half of the year, such as a failed naira redesign policy, weak growth due to low crude oil output, high inflation, and currency devaluation, as factors with negative ripple effects in the second half of the year.
