The professional services firm, KPMG, has warned that further tightening measures in Nigeria could harm the country’s economy amid high inflation.
According to a recent macroeconomic outlook report by the firm, rising energy, fuel, transport, and related costs are largely responsible for the surge in core inflation in March 2023.
Despite efforts to increase electronic transactions and improve the availability of cash, Nigeria is still struggling with high inflation, particularly in the areas of food, energy, transport, and distribution prices, the report noted. The CPI rose to 22.04 percent in March 2023, up from 21.91 percent in February 2023.
KPMG notes that inflation in Nigeria is largely driven by cost-push factors that are out of the control of monetary authorities, and therefore, further tightening measures could do more harm than good. The report suggests that a strategy to cut production costs and boost supply, as well as control conditions stifling distribution, could be more effective in controlling consumer inflation.
The report also highlights the progress made by Nigeria in improving electronic transactions and the availability of cash. The currency in circulation has risen following the CBN’s policy reversal to allow old naira notes to continue alongside the new notes. However, Charly Boi on Monday took to his Twitter handle to raise concerns about the scarcity of new Naira notes. News About Nigeria Reports.
The number of mobile banking transactions has more than doubled since the naira design policy, and the number of payment companies, digital banks, and POS terminals has grown to record highs.
However, KPMG warns that further tightening measures at this point could harm the economy, particularly in terms of constraining non-oil export growth, slowing employment creation, and worsening poverty. The report recommends that the government should focus on strategies that cut production costs and boost supply, which will ultimately help to control inflation.
