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KPMG downgrades Nigeria’s economic growth forecast to 2.65% in 2023

KPMG downgrades Nigeria’s economic growth forecast to 2.65% in 2023
August 28
17:37 2023

KPMG has adjusted its growth forecast for the Nigerian economy to 2.65 percent in 2023 – down from 2.85 percent earlier projected.

The professional services firm, in a flashnote titled ‘Underwhelming Q2 2023 GDP Growth Recorded’, and released over the weekend, said the revision is premised on various considerations.

KPMG listed the factors to include the recent contraction in oil production, muted government investment in the economy, the impact of subsidy removal and foreign exchange (FX) rates unification on households, among others.

“Q2 2023 GDP results is broadly in line with our earlier downward revision of 2023 GDP to 2.85%. Nevertheless, we are adjusting our 2023 forecast further downwards to 2.65%,” KPMG said.


“Firstly, half-year 2023 GDP currently stands at 2.41% and will require an average growth in H2 2023 of 3.30% and 3.50% to end the year at 2.85% and 3.0% respectively for 2023 which we believe is challenging and unlikely.

“Q2 2023 is however the quarter where the impact of Subsidy removal, FX unification and other reforms of the new administration had it major impact on squeezing household consumption demand and firms’ costs of operations as well as reduced private investment as firms continued to adopt a wait and see approach, tweak strategies to cope with rising costs and reduced demand for their goods and services and struggled to find FX to operate. These factors will likely constrain non-oil growth given that household consumption and private investment constitute the largest share of GDP.

“The impact of subsidy removal was evident in the biggest contraction in road transportation GDP since the new GDP series. Though, subsidy was only removed in June 2023 representing one month impact of the three months of the quarter, road transport GDP contracted by -55.14% in Q2 2023, representing the biggest contraction in road transport GDP in history.


“This contradicts the muted results recorded with respect to inflation for that same month which according to NBS was not expected to fully reflect on the CPI though methodologically, the Inflation rate in each sector is used to deflate nominal GDP for that sector.

“At the same time, there has been muted government capital investment in the economy in Q2 2023 and the first half of Q3 2023 so far, with new administrations at the Federal and State level settling down in Q3 2023.

“Furthermore, oil production has started Q3 2023 with a further contraction in July 2023 and if this trend continues for the remaining two months of Q3 2023, we will have a situation where non-oil sector growth and oil sector growth underperform.”

The firm also said it expected further increases in inflation for the rest of the year which would make the pressure on nominal to real gross domestic product (GDP) to be higher, thereby curtailing higher real GDP growth in Q3 2023.


Recently, the National Bureau of Satistics (NBS) disclosed that Nigeria’s GDP slowed to 2.51 percent in the second quarter (Q2) of 2023 due to the challenging economic conditions being experienced.

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