“The marginal growth in GDP by 2.5% in Q2 2023 from 2.3% in Q1 2023 was caused by the lingering effect of the cash crunch,” PwC said.
The Nigerian economy will limp on at the slow tempo of growth it started the first quarter of the year with through to the end and expand at virtually the same rate next year, PricewaterhouseCoopers (PwC) foresaw in a new outlook for Africa’s largest economy.
“The marginal growth in GDP by 2.5% in Q2 2023 from 2.3% in Q1 2023 was caused by the lingering effect of the cash crunch. PwC projects a 2.8% growth rate for Nigeria in 2023 and 3% in 2024,” the consultancy firm said.
That marginal projection could be part of the chain reaction from enforcing fiscal reforms in Nigeria, according to the professional services firm.
This year’s forecast slightly lags the reckoning this month by the International Monetary Fund (IMF), which put Nigeria’s GDP growth rate at 2.9 per cent and that of 2024 at 3.3 per cent.
The 2024, as the IMF projected, falls behind the emerging market and developing economies average, but is way ahead of that of Africa’s most industrialised economy South Africa.
Interestingly, the Bretton Woods institution expects the Southern African country to confine Nigeria to the second position on the continent in GDP terms next year even at a 1.8 per cent growth rate.
Three sectors namely manufacturing, ICT and finance & insurance together contributed 45 per cent of company income tax and value-added tax in the first quarter, seen by PwC to mean revenue receipt is not broadly spread across the 21 sectors of the economy.
“This may have implications for reaching the targeted tax to GDP of 18% by 2026 and government revenue generation capacity in the short to medium term.”
Nigeria is on a drive to buck tax’s contribution to GDP up to 18 per cent by 2026 so that the country, one of the crop with the lowest tax-to-GDP ratio in the globe, will be able to bolster revenue as borrowing is no longer an option for government finance.
Debt servicing currently gulps 96 per cent of government revenue after securitising the credit from the Central Bank of Nigeria, the so-called Ways & Means, and a devaluation of the naira magnified public debt to N87.4 trillion in the quarter to June.
With little room left to manoeuvre within the statutory debt allowance, borrowing is not on the cards, the government said in August.
Attention will instead shift to cultivating overseas investors, it added.