PwC sees Nigeria’s inflation declining to 29%, GDP to rise by 2.9%

Nigeria’s headline inflation will drop to 29.5 percent by end 2024 while the country’s gross domestic product is expected to rise albeit marginally to 2.9 percent, PwC projects in its new report.

In its economic outlook for the second half of the year entitled, “Nigeria Economic Outlook: Navigating Economic Reforms”, the multinational advisory and tax services company stated that the decrease in inflation would ease the pressure on the economy and balance the effects of the market reforms.

“PwC projects a marginal decline in inflation to 29.5% by year end, balancing the effects of reforms, policy actions, external pressures and food prices; particularly in the second half of the year,” it said.

Inflation increased from 22.41 percent in May 2023 to 33.95 percent in May 2024 with food, utilities and transportation being the major drivers of the country’s rising consumer price.

Food inflation increased to 40.6 percent, utility inflation at 29.6 percent and transport inflation at 25.6 percent, shrinking the disposable income of Nigerian workers.

“The rise in food inflation was due to low agricultural productivity, poor logistics and insecurity in the food producing regions of the country,” the report stated.

“Utilities inflation was due to the increase in price of rent, electricity, water supply and other fuels while transport inflation was due to an increase in the price of petroleum products including PMS,” it added.

Inflation and exchange rate pressures have reduced the real value of household disposable income and consumption expenditure. This has continued to fuel a discontent and a pronounced cost-of-living crisis.

PwC noted that despite the Central Bank of Nigeria’s inflationary targeted actions to stem the tide of inflation, it has not yet tapered its continuous rise which is now at a 28-year high.

Also in its forecast, the tax, finance and advisory firm said Nigeria’s GDP would increase given a further commitment to policy reforms.

“GDP may grow marginally by 2.9% on the back of sustained policy reforms although growth prospects may be limited by elevated economic pressures,” it said.

In the first three months of 2024, Africa’s most populous nation saw its GDP grow by 2.98 percent compared to 2.31 percent recorded in Q1 2023.

According to the report, the growth in Q1 2024 was due to performance in the financial and insurance sector (from 21.37% in Q1 2023 to 31.24% in Q1 2024) and mining and quarrying sector (from -3.96% in Q1 2023 to 6.30% in Q1 2024).

To achieve this projection, the London-based firm advised the government to prioritise macro stability by addressing security, social and pressure points of inflation and exchange rate pressures.

It stated that the government needs to mobilise capital to drive growth through market focused policies, intensification of investment promotion and make short and long-term sectoral bets focused on exports, domestic substitution and job creation.

“Government must drive fiscal prudence by optimising spending on capital projects with the highest ROI, rationalise public service spending and improve revenue diversification and collection efficiency,” PwC said.