Nigeria’s headline inflation rate is expected to reach 30% by December 2023, according to a forecast by global financial advisory firm Klynveld Peat Marwick Goerdeler (KPMG).

KPMG noted in its macroeconomic review for the first half of 2023 and its outlook for the second half of the year (H2) that recent reforms in the petroleum industry (such as the elimination of fuel subsidies) and the unification of the foreign exchange market will be responsible for the forecast increase in the prices of goods and services.

The report states: “We expect current inflationary pressures in the economy to persist into the second half of 2023…Specifically, our model suggests that the combined impact of the removal of fuel subsidies and foreign exchange liberalization will drive headline inflation through December 2023 could drive up to around 30%.” ”

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On how to control inflation, the report stated that the current MPR hike undertaken by the apex bank over the last 18 months has proven ineffective in curbing the increasing trend of inflation. However, it noted that addressing issues such as energy and transportation costs, supply chain issues and increasing local production will be more effective than increasing interest rates.

The report also predicted that Nigeria’s economy will grow by 2.6% in 2023 – a significant decline from the World Bank’s forecast of 2.8% in 2023, and that President Bola Tinubu’s recent reforms, such as the abolition fuel subsidies and the unification of the foreign exchange market, will reduce GDP growth in the country.

The report states: “We expect the Nigerian economy to grow by 2.6% in 2023, which is below the World Bank’s revised forecast for Nigeria of 2.8% for 2023 and the growth rate achieved in 2022 3.1%.”

The report also explained that the recent macroeconomic malaise in the first half of the year such as the failed Naira redesign policy, weak growth due to low crude oil production, high inflation, removal of fuel subsidies and devaluation of the Naira will have a negative impact in the second half of the year.

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