PwC Nigeria, a professional services firm has projected a 2.8 percent economic growth rate for Nigeria in 2023 and three percent in 2024.
In its latest Nigeria economic outlook on Wednesday, PwC said this marginal growth projection may be due to the emerging effects of the implementation of domestic fiscal reforms by the ministerial and economic management team of the country.
“The fastest growing sectors were utilities (31.8 percent), financial services (26.8 percent), information & communication (8.6 percent), and construction (3.4 percent),” the report said.
It said the growth in the activities of the utility sector may be partly attributed to the increase in the number of metered customers by 3.1 percent to 5.47 million people while an increase in interest income, digital transactions, and forex revaluation gains may be responsible for the growth in financial services.
Last year, Africa’s biggest economy grew at a slower pace to 3.1 percent in 2022 from 3.4 percent in 2021, according to the National Bureau of Statistics.
The PwC report also revealed that real income is still under pressure as inflation (25.8 percent as of August 2023) continues to rise and the national minimum wage remains unchanged in the short term.
“In addition, input costs (including the year-on-year increase of 216 percent in Petrol Motor Spirit from January to September) will continue to pass through to consumer prices further worsening the affordability of goods and services in the economy in the short to medium-term,” it said.
It added that a rise in energy, food, transportation, and import costs may dampen consumer spending on non-discretionary items.
“Capital reallocation from Nigeria’s economy may continue to impact foreign investment flows in the short to medium term. Investors may adopt a wait-and-see approach due to lack of forward guidance on Foreign Exchange policy.”
According to the authors of the report, the unsettled FX backlogs may lead to a scarcity of goods and inputs for manufacturing and trade leading to further increases in prices.
“Government spending will rise but continue to be constrained by debt servicing obligations and a huge fiscal deficit,” they said.