Nigeria: Six per cent GDP growth projection unachievable, says KPMG

A multinational consulting firm, KPMG, has stated that the President Bola Tinubu’s goal of increasing the country’s Gross Domestic Product growth rate to six per cent cannot be achieved in four years.

The company in its issue Eight Flashnotes released on Friday said the government plan, which means growing the value of real GDP from N74.6 trillion in 2022 to N92.5 trillion by 2026 representing an increase of N17 trillion in 4 years, is “not feasible”.

It noted that while GDP growth rate of three per cent was assumed in the first year, going by World Bank’s projection for 2023, the economy would have to grow by an average of seven per cent for the subsequent three years and moving growth from a forecasted three per cent in 2023 to at least seven per cent in 2024 and afterwards, which seemed overly ambitious.

It added that the achievable GDP growth rate within the next four years would be around 4-4.5 per cent.

The firm asserted, “We are of the opinion that there is very limited space to attain a six per cent average real growth rate in four years or an increase in real GDP by N17tn and an average GDP growth rate of between 4-4.5 per cent at the best is more feasible in the next four years. Even this will require the country to get its policies right and keep consistent faith with macroeconomic reforms.”

According to KPMG, challenging macroeconomic environment and various constraints such as inflation, subsidy removal, and infrastructure limitations are challenges the government would face to maintain a fine and delicate balance across economic variables.

Giving further reasons, the multinational company said, “For example, to grow government revenue to expand government consumption and investment, it might increase taxes and /or borrow from the private sector. However, increasing taxes can lower purchasing power and slow consumption expenditure growth. At the same time private investment may be curtailed as business earnings are squeezed from slowing demand, higher costs from higher taxes, and higher interest rates as government borrowing crowds out private-sector lending and then pushes rates up.

“GDP using the expenditure approach, is the cumulation of household and government consumption expenditure, private and public investment, and net exports, which means the president will have to introduce policies and take decisions that will lead to growth across these variables. However, taking decisions in one variable can lead to a decline in another.

It added that the initiatives government and the private sector might also have to put in place to cushion the effects of the removal of petrol subsidy might also worsen the costs of businesses and leave less for expansion in the short to medium term, which covers the duration of the president’s first term and the focus of his growth targets.