CFOs expect Nigeria’s economic growth to decline in 2023 – KPMG

Article Summary 

• 31% of CFOs expect Nigeria’s economic growth to decline in 2023, while 41% believe there would be no significant growth at all.
• Reasons given for the lacklustre growth forecast include delay in fuel subsidy removal, uncertain foreign exchange environment, high inflation rate, insecurity, and tax and regulatory posture.
• Key trends shaping Nigeria’s economy in 2023 include fuel subsidy, inflation, global economic slowdown, 2023 general elections, tax and other fiscal policies, increased regulation, uncertain foreign exchange environment, emerging digital economy, power challenges, and insecurity.

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The 2023 Annual CFO Outlook Survey by KPMG Nigeria has shown that while some Chief Financial Officers (31%) expect Nigeria’s economic growth to decline in 2023, 41% of the CFOs believe there would be no significant growth at all.  

Some of the reasons the CFOs gave for the lacklustre growth forecast include the delay in fuel subsidy removal, uncertain foreign exchange environment, high inflation rate, insecurity, and tax and regulatory posture.  

The survey report quoted Citibank Nigeria’s CFO, Sharafadeen Muhammed, to have said: 

• “Fiscal policy has been under pressure recently and removal of oil subsidy would help greatly in providing headroom for the government coffers to enable the provision of development benefits to citizens.” 

More insights from the survey 

52% of the CFOs surveyed did not have great confidence in the prospect of growth for their respective industries as they identified inflation rate, global economic slowdown, and general economic uncertainty as reasons for the gloomy outlook.  

KPMG noted that Nigeria’s headline annual inflation maintained an upward trend throughout 2022, reaching its highest level in almost two decades. According to KPMG, this was driven by persistent structural issues, rising international food and energy prices and other policy-related bottlenecks that impact the cost of doing business. 

CFOs advised the incoming administration to tackle the high inflation rate, insecurity, and instability of the foreign exchange environment to boost economic growth and increase investor and public confidence. 

What you should know

KPMG identified some key trends that will shape Nigeria’s economy in 2023 as; fuel subsidy, inflation, global economic slowdown, 2023 general elections, tax and other fiscal policies, increased regulation, uncertain foreign exchange environment, emerging digital economy, power challenges and insecurity. 

• The Annual CFO Outlook survey from KPMG offers insightful information on how CFOs and organizations view the prevailing business environment, their expectations of government/policymakers, and their responses to their business challenges.

In case you missed it

In the meantime, it seems the Nigerian government is not yet ready to implement the fuel subsidy removal policy. On Thursday, April 27, the federal government suddenly reversed its earlier decision to remove fuel subsidies in June 2023. 

According to the country’s minister for finance, Dr Zainab Ahmed, the decision was taken because the government has to initiate some building blocks that will lead to the eventual removal of fuel subsidies.  

• “Fuel subsidy must be removed earlier rather than later because it is not sustainable. We cannot afford it anymore. But we must do it in such a way that the impact of the subsidy is as much as possible, mitigated on the lives of ordinary Nigerians. 
• “So, this will require looking at alternatives to the fuel subsidy that needs to be planned for and subsequently put in place. But also, what needs to be done to support the people that will be most affected because of the removal? We have a plan that we will start working on, putting the building blocks towards the eventual removal of the first subsidy.”