Global consulting firm KPMG has projected that Nigeria’s unemployment rate would rise further to 40.6 percent in 2023.
In a report titled ‘Global Economic Outlook’, the firm also said the inflation rate is predicted to remain above 20 per cent in 2023 due to structural and policy issues.
The National Bureau of Statistics as of the fourth quarter of 2020 said that the country‘s unemployment rate stood at 33.3 per cent.
The statistics office in its latest inflation report in February announced that the nation’s inflation rate rose to 21.91 per bcent.
KPMG projects that unemployment is expected to continue to be a major challenge in 2023 due to the limited investment by the private sector, low industrialization, slower than required economic growth and consequently the inability of the economy to absorb the 5 million new entrants into the Nigerian job market every year.
“Although lagged, the National Bureau of Statistics recorded an increase in the national unemployment rate from 23.1 percent in 2018 to 33.3 percent in 2020.
“We estimate that this rate has increased to 37.7percent in 2022 and will rise further to 40.6 percent in 2023,” the report said.
KPMG noted that the high rate of inflation was driven by persistent structural issues which impacted domestic food production and transportation.
The issues include insecurity, floods in key agricultural producing areas, rising international food and energy prices following the Russia-Ukraine conflict, as well as other policy-related bottlenecks which continue to impact the cost of doing business.
“Additionally, the expected fuel subsidy removal and the 2023 Fiscal Bill are also expected to keep pressure on domestic prices in 2023,” it said.
KPMG predicts a deeply rooted challenging environment, characterized by fragile and slow economic growth and challenges in the foreign exchange market for the new government by May.
It also said the inadequate government revenue to support much-needed expenditure, leading to a high debt stock and high debt service payments may pose another challenge.
As of the end of 2022, the country’s GDP grew at 3.52 per cent with 2.25 per cent in the third quarter of 2022, with growth averaging 3.10 per cent over 2022.
This represents eight consecutive quarters of growth, following its exit from the pandemic-induced recession in Q3 2020.
The firm attributed the growth in 2022 to the non-oil sector, as continuous recovery in household consumption boosted spending, particularly in finance and insurance services, telecommunications, and transportation and storage services.
While the non-oil sector grew by 4.84 percent, the oil sector contracted by 19.22 per cent, largely attributed to worsening oil theft, pipeline vandalization, underinvestment, and other operational challenges inhibiting oil production.
It expects Nigeria’s GDP to continue to grow at a relatively slow pace of 3 per cent in 2023 due to the slowdown in economic activity that typically characterises periods of political transition in Nigeria.
It also said the spillover from an expected slowdown in the global economy in 2023 and its trade and financial flows implications are expected to drag on GDP.
“Additionally, growth will be negatively affected by the Naira redesign policy introduced in Q4 2022 and Q1 2023 and its implications on key non-oil sectors like manufacturing, trade,accommodation, and food services, transportation and other services, further slowing down overall GDP growth in 2023,” it said.
Telecommunications, trade services, as well as an expected recovery in the oil sector, on account of measures being taken to tackle security issues, are expected to drive its forecast of 3 percent growth in 2023.