KPMG, a global consultancy Firm, providing audit, Tax and Advisory services has said that the plan by President Bola Tinubu to grow the nation’s economy by six percent is over-ambitious and as such cannot be achieved in four years.
In its “Eight Flashnotes” posted on its website at the weekend, the company noted that President Bola Ahmed Tinubu’s plan to grow Nigeria’s Gross Domestic Product (GDP) from N74.6 trillion in 2022 to N92.5 trillion by 2026, representing an increase of N17 trillion in four years, is “not feasible.”
The report notes that while the GDP growth of three percent is assumed in the first year going by World Bank’s projection for 2023, the economy will then have to grow by an average of seven percent for the subsequent three years and move growth from a forecasted three percent in 2023 to at least seven percent in 2024 and afterward, which seems overly ambitious, adding that the best possible GDP growth rate to be achieved within the next four years would be between four to 4.5 percent.
“We are of the opinion that there is very limited space to attain a 6 pet cent average real growth rate in four years or an increase in real GDP by N17 trillion 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,” the report read.
It stressed that a challenging macroeconomic environment and various constraints such as inflation, subsidy removal, and infrastructure limitations are some of the 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.
“The initiatives government and the private sector may also have to put in place to cushion the effects of the removal of petrol subsidy may 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.
“Household consumption expenditure which is the largest share of GDP and the easiest to grow is, however, constrained by high double-digit inflation which is expected to get worse with the subsidy removal, the implementation of the finance bill 2022 and the unification of the Forex rate whenever it is implemented within the next four years, in addition to the perennial supply and transportation bottlenecks, security concerns and power and other infrastructural constraints to doing business in Nigeria will affect costs of production and price of goods and services,” KPMG stated.
