KPMG: Nigeria’s economy on course for improved performance

A recent report by KPMG suggests that Nigeria could be on track for an improved economic performance this year, indicating that the impact of energy and foreign exchange reforms may be diminishing. Wole Adelokun, the Partner & Economist at KPMG West Africa, shared insights during an interview with CNBC Africa, highlighting key factors driving this positive outlook. Adelokun pointed out that global dynamics, such as supply chain disruptions and decreasing global inflation rates, are expected to contribute to a more favorable economic landscape for Nigeria in the coming months. One of the significant areas of focus in the report is inflation, with expectations that inflation rates will slightly decrease in the second half of the year. Adelokun attributed this anticipated decline to various factors, including the Central Bank of Nigeria's (CBN) policy on inflation targeting and government actions to suspend import duties on essential food items. He also emphasized the impact of global trends on inflation, particularly for import-dependent economies like Nigeria. Furthermore, Adelokun highlighted the positive influence of recent government reforms on the Nigerian economy. Reforms such as the unification of the foreign exchange market have bolstered confidence and stability, leading to increased foreign portfolio investments and external reserves. Additionally, efforts to boost agricultural productivity and streamline supply chains have further contributed to a more favorable business environment, as indicated by the Purchasing Managers' Index (PMI) showing a rebound in manufacturing activities. While addressing the challenge of inflation, particularly food inflation, Adelokun stressed the importance of addressing issues across the agricultural value chain. He emphasized the need to enhance production, address logistical bottlenecks, and improve market accessibility to effectively mitigate food inflation, which currently stands at around 42 percent. In terms of household consumption and spending power, Adelokun acknowledged the impact of inflation on purchasing power and consumer behavior. He highlighted government initiatives, such as the consumer credit scheme, aimed at providing financial support to working-class individuals to enhance their capacity to consume. By empowering consumers through access to credit and supporting the real sector with credit facilitation, Adelokun believes that household consumption and overall economic growth can be stimulated. In conclusion, KPMG's optimistic outlook for Nigeria's economy is underpinned by a combination of global trends, government reforms, and targeted interventions to address key economic challenges. As the year progresses, efforts to sustain momentum in reform implementation, boost productivity in key sectors, and support consumer spending are expected to contribute to a more resilient and vibrant Nigerian economy.