Economy: KPMG Issues Tinubu A Thumb Down

KPMG has predicted that Nigeria’s economy would likely not grow beyond 2.65 percent before the end of the year.

The forecast, according to those watching is a vote of no confidence on the administration of President Bola Ahmed Tinubu and its administration’s efforts to turn the economy around.

The firm’s new forecast is coming on the heels of an earlier one where it said, the country’s Gross Domestic Product, GDP, will experience growth of 2.85 percent in the year.

According to a report titled ‘Underwhelming Q2 2023 GDP Growth Recorded’, KPMG stated that the review came as a result of the current economic realities in the country, which include the government’s removal of fuel subsidy and the unification of the exchange rate of the naira.

The policies, the financial service firm said have affected the living standards of Nigeria apart from the fact that they have also hampered foreign capital investment in the country.

Therefore, “Q2 2023 GDP results are broadly in line with our earlier downward revision of 2023 GDP to 2.85 percent. Nevertheless, we are adjusting our 2023 forecast further downwards to 2.65 percent,” KPMG said.

The firm stated that it would be “challenging and unlikely” for the government to attain the growth rate of 2.85 it earlier forecast for the country.

KPMG cited factors that would hamper higher economic growth to include squeezes “in government’s investment, household consumption demand and firms’ costs of operations as well as reduced private investment as firms continued to adopt a wait and see approach, tweak strategies to cope with rising costs and reduced demand for their goods and services and struggled to find forex to operate.”

“These factors will likely constrain non-oil growth given that household consumption and private investment constitute the largest share of GDP.

“The impact of subsidy removal was evident in the biggest contraction in road transportation GDP since the new GDP series. Though subsidy was only removed in June 2023 representing one month impact of the three months of the quarter, road transport GDP contracted by -55.14 per cent in Q2 2023, representing the biggest contraction in road transport GDP in history.

“This contradicts the muted results recorded with respect to inflation for that same month which according to NBS was not expected to fully reflect on the CPI though methodologically, the Inflation rate in each sector is used to deflate nominal GDP for that sector.

“At the same time, there has been muted government capital investment in the economy in Q2 2023 and the first half of Q3 2023 so far, with new administrations at the Federal and State level settling down in Q3 2023.

“Furthermore, 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 stated.

Meanwhile, not a few Nigerians have criticized the economic growth figures usually bandied by the government and private firms, saying they have not translated into better living standards for the people of the country.

Over 140 million Nigerians are currently living below the poverty level, according to figures provided by the government agency, Nigeria Bureau of Statistics, NBS, despite all the figures that have been released in the past that the economy had grown.