KPMG has predicted that Nigeria’s GDP will continue to grow at a relatively slow pace of 3 percent in 2023 due to the slowdown in economic activity that typically characterizes periods of political transition in Nigeria.
The professional services company said in a report titled ‘Global Economic Outlook – H1 2023’ that a new government taking over from the current administration in May would face a deeply rooted challenging environment, characterised by fragile and slow economic growth and challenges in the foreign exchange market.
It said: “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 andQ1 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 report said government revenue remains inadequate to support much-needed expenditure, leading to a high debt stock and high debt service payments.
It said: “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.”
KPMG said that 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 vandalism, 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,” it added.
The firm said that despite aggressive rate hikes, inflation has remained stubbornly high in the country and is predicted to remain above 20 percent in 2023 due to the persistence of structural and policy issues.
“Unemployment is expected to continue to be a major challenge in 2023 due to the limited investment by the private sector, low industrialisation 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,” it said.
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The National Bureau of Statistics said in 2021 that the unemployment rate from 23.1 percent in 2018 to 33.3 percent in the fourth quater of 2020.
“We estimate that this rate has increased to 37.7 percent in 2022 and will rise further to 40.6 percent in 2023,” KPMG said.
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