PricewaterhouseCoopers (PwC), a multinational professional services company, offers an optimistic outlook on Nigeria’s inflation rate.
Their latest economic report predicts a decline to 29.5% by the end of 2024. This is a potential reduction from the current high inflation rate, which recently reached 33.95% in May 2024, according to the National Bureau of Statistics (NBS).
In a projection entitled ‘Navigating economic reforms’, PwC “projects a slight decline in inflation to 29.5 percent by the end of the year, balancing the impact of reforms, policy actions, external pressures and food prices; especially in the second half of the year.”
Additionally, they also anticipate that Gross Domestic Product will grow marginally by 2.9 percent thanks to ongoing policy reforms although growth prospects may be constrained by increasing economic pressures.
The report said, “Nigeria’s total public debt stood at N121.67 trillion ($91.46 billion) as of March 31, 2024. The comparative figure for December 31, 2023 was N97.34 trillion ($108.23 billion). Total Internal Debt is N65.65tn ($46.29 billion) while total external debt is N56.02tn ($42.12 billion).”
The report further calls on the government to “Prioritize macro stability by addressing security, social and inflation and exchange rate pressure points. Adopt scenario planning before major economic reforms are implemented to avoid unwarranted policy reversals, such as cybersecurity levies.
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And for businesses, PwC urges creating “a clear strategy by reviewing your strategy and clarifying what you must do to win in the future – whatever the economic scenario.
“Revisit your entire cost structure to define short, medium and long-term actions to make fundamental adjustments for the future.
“The government must encourage fiscal prudence by optimizing spending on capital projects with the highest ROI, rationalizing public service spending and increasing revenue diversification and collection efficiency. “Governments must decide when and how to introduce, delay, sequence or change different policies based on current economic and social conditions,” the company added.
The report attributed the projected decline to a combination of factors, including:
• Impact of ongoing government reforms and policy actions: The specific nature of these reforms and actions is not detailed in the PwC report, but will likely include fiscal and monetary policies aimed at controlling inflation.
• External pressures: While this report does not detail actual external pressures, global factors such as energy and commodity price volatility can have a significant impact on inflation in import-dependent economies such as Nigeria.
But the forecast acknowledges that major challenges remain. The projected year-end inflation rate of 29.5% is still a very high figure. In addition, the report also states that increasing economic pressures could limit the potential for large economic growth, even though there is an anticipated decline in inflation.
This PwC report adds to the ongoing conversation about Nigeria’s economic prospects.
Here are some important things to consider:
• Uncertainty around forecasts: While PwC’s forecasts offer a glimmer of hope, it is important to acknowledge the uncertainty inherent in the forecasts. External factors and the effectiveness of government policies can significantly influence the actual inflation rate.
• Need for more detail: The PwC report provides a general overview, but a more comprehensive analysis would benefit from digging deeper. Specific details regarding the reforms, external pressures impacting the forecasts, and potential risks to these forecasts would be useful for businesses and policymakers.
• Focus on long-term solutions: While the potential for reduced inflation is good news, addressing the root causes of high inflation is critical to maintaining economic growth and stability. Policies aimed at increasing domestic production, reducing dependence on imports, and encouraging diversification can produce more resilient long-term economic performance.
In conclusion, the PwC report offers an optimistic outlook on Nigeria’s inflation rate. However, a more comprehensive analysis and continued focus on long-term economic solutions will be critical to ensuring a stable and prosperous future for the Nigerian economy.
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