•Adjusts economic forecast to 2.7%
KPMG Nigeria has adjusted Nigeria’s economic forecast to 2.65 per cent from it’s initial forecast of 2.85 per cent.
According to the firm’s economic flashpoint released at the weekend, this decision was taken based on some factors, which include; the recent contraction in oil production, muted government investment in the economy, the impact of subsidy removal and foreign exchange (FX) rates unification on households, among others.
It said that H1 2023 gross domestic product (GDP) currently stands at 2.41 per cent and will require an average growth in H2 (second half) 2023 of 3.30 per cent to record 2.85 per cent.
Whilst noting that the third quarter of 2023 is the quarter where the impact of subsidy removal, foreign exchange (FX) unification and other reforms of the new administration had a major impact on squeezing household consumption demand and firms’ costs of operations as well as reduced private investment, the firm said, “Muted government investment in the economy in Q2 and Q3 2023 with new administrations at the Federal and State level settling in Q3 2023. Further contraction in oil production in July 2023 is likely to continue for the following two months. Expectation of continued rising inflation in Q3 2023 and its impact on real GDP growth.
It noted further that real GDP in Nigeria rose by 2.51 per cent, year-on-year in the second quarter of 2023, slightly higher than 2.31 per cent recorded in Q1 2023 and 3.54 per cent in Q2 2022 with industry returning to contraction.
According to the report, “Oil production has started Q3 2023 with a further contraction in July 2023 and if this trend continues for the remaining two months of Q3 2023, we will have a situation where non-oil sector growth and oil sector growth underperform.”
KPMG also said it expected further increases in inflation for the rest of 2023, which would make the pressure on nominal to real gross domestic product (GDP) higher, curtailing higher real GDP growth in Q3 2023.