Global financial advisory service firm, KPMG, has advised the Central Bank of Nigeria (CBN) to adopt measures including energy and transportation costs, supply chain problems, and boosting local production to check the country’s spiralling inflation.
KPMG stated this in its macroeconomic review for the first half of 2023 and outlook for the year’s second half (H2).
The firm explained that the current MPR hike being adopted by the apex bank in the last 18 months had proven ineffective in stalling the increasing inflationary trend.
It, however, pointed out that the suggested measures would be more effective than increasing interest rates.
KPMG also projected that headline inflation in Nigeria will rise to 30 per cent by December 2023.
Nigeria’s current headline inflation rate for the month of September is 26.72 per cent.
The report attributed the projected rise in inflation to recent reforms in the petroleum industry such as the removal of fuel subsidy and unification of the foreign exchange market.
“We anticipate that the current inflationary pressure in the economy will persist into H2 2023… Specifically, our model suggests that the combined influence of fuel subsidy removal and foreign exchange liberalisation may drive headline inflation to about 30% by December 2023.”
The report also projected that Nigeria’s economy will grow by 2.6 per cent in 2023 – a considerable reduction from the World Bank’s projection of 2.8 per cent in 2023 and that the recent reforms from President Tinubu such as fuel subsidy removal and unification of the FX market will lower GDP growth in the country.
“We expect the Nigerian economy to grow by 2.6% in 2023, lower than the revised World Bank’s 2023 forecast of 2.8% for Nigeria and the 3.1% growth rate achieved in 2022,” it added.
The report further indicated that recent macroeconomic malaise during the first half of the year such as the failed naira redesign policy, weak growth because of low crude oil output, high inflation, and the fuel subsidy removal and devaluation of the naira will have negative ripple effects in the second half of the year.