Nigeria faces a balancing act in the second half of 2024, with inflation projected to decline slightly while economic growth remains tepid, according to a new report by PwC.
The headline for Nigerians is some relief on the inflation front. PwC forecasts a decrease in inflation to 29.5% by the year’s end. This would mark a welcome change from the current record high of 33.95% recorded in May 2024, a significant increase from 22.41% in May 2023.
However, it’s important to note that this projected decline is marginal, and Nigerians will still be grappling with significantly higher prices compared to previous years.
Food, Utilities, and Transportation Lead Inflation Surge
The report highlights the main culprits behind Nigeria’s inflation woes: food, utilities, and transportation. Food inflation, driven by low agricultural productivity, poor logistics, and insecurity in food-producing regions, soared to a staggering 40.6% in May 2024.
PwC Nigeria Country Leader, Andrew Nevin, commented: “The rise in food prices is particularly concerning as it directly impacts the disposable income of Nigerian households. This, coupled with rising utility and transportation costs, has created a significant cost-of-living crisis.”
Utilities and Transportation saw inflation rates of 29.6% and 25.6% respectively. This translates into a shrinking disposable income for Nigerian households, leading to a pronounced cost-of-living crisis and growing discontent.
CBN Efforts Yet to Yield Significant Results
While the Central Bank of Nigeria (CBN) has implemented various measures to curb inflation, the impact hasn’t been substantial enough. Inflation continues to climb, posing a major challenge to the nation’s economic stability.
The high inflation rate has had a domino effect, eroding household disposable income and dampening consumer spending. Despite the Central Bank of Nigeria’s efforts to curb inflation, including targeted monetary interventions, the situation remains precarious
Marginal GDP Growth Expected
Despite the inflation concerns, PwC projects a marginal increase in Nigeria’s GDP of 2.9% for the year. This follows a positive first quarter of 2024, which saw GDP growth of 2.98% compared to 2.31% in Q1 2023.
The report attributes this growth to strong performance in the financial and insurance sector (up from 21.37% to 31.24% in Q1 2024) and the mining and quarrying sector (turning around from a -3.96% in Q1 2023 to a positive 6.30% in Q1 2024).
PwC Recommendations for Economic Stability
To achieve its GDP projection and ensure long-term economic health, PwC suggests the Nigerian government prioritize macro stability. This includes addressing security concerns, social issues, and the pressure points driving inflation and exchange rate volatility.
Key recommendations from the report include:
PwC outlines crucial steps the Nigerian government can take to achieve its projected economic goals. Here are some key recommendations:
Prioritize Macroeconomic Stability: Addressing security concerns, managing social pressures, and mitigating factors contributing to inflation and exchange rate fluctuations are essential for creating a stable economic environment.
Mobilizing Capital for Growth: Implementing market-oriented policies, intensifying investment promotion, and focusing on exports, domestic substitution, and job creation are key to driving growth.
Fiscal Prudence: Optimizing spending on high-return capital projects, rationalizing public service expenditure, and improving revenue diversification and collection efficiency are crucial measures for responsible fiscal management.
Read Also: Nigeria’s Debt Burden: Interest Payments to Consume Over 35% of Government Revenue in 2024
If You Ask Me
The success of Nigeria’s economic future hinges on the government’s ability to implement these crucial reforms while managing the ongoing inflationary pressures. By prioritizing macro stability and targeted policy interventions, Nigeria can navigate the complex economic landscape and pave the way for sustainable growth.
