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By Chinwendu Obienyi
More reactions have continued to trail Nigeria’s soaring inflation with PwC being the latest in urging the federal government to practice fiscal prudence by optimising capital project spending, rationalizing public service expenditure, and improving revenue collection efficiency.
The consulting firm further projected a marginal decline in Nigeria’s inflation to 29.5 per cent by the end of this year.
The company made the projection in its latest economic outlook report on Nigeria released on Monday.
According to the company, the decline would be achieved as a result of the ongoing reforms and policy actions of the government.
Data from the Consumer Price Index (CPI) and inflation report released by the National Bureau of Statistics (NBS), consumer prices maintained an upward trend for the 28th consecutive month in the month of May as headline inflation rose by 26 basis points (bps) to 33.95 per cent y/y in May from 33.69 per cent recorded in April.
PwC projects a marginal decline in inflation to 29.5 per cent by year-end, balancing the effects of reforms, policy actions, external pressures, and food prices; particularly in the second half of the prices outlook year.
Despite the positive projection, the company highlighted key considerations for the government in the areas of policies that could help stabilize the economy. Specifically, it urged the government to prioritize macro stability by addressing security, social and pressure points of inflation, and exchange rate pressures.
According to PwC, the government would also need to mobilise capital to drive growth through market focused policies, intensification of investment promotion.
It also advised the government to make short- and long-term sectoral bets focused on exports, domestic substitution, and job creation.
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“Government must drive fiscal prudence by optimising spending on capital projects with the highest ROI, rationalise public service spending and improve revenue diversification and collection efficiency. It must decide when and how to introduce, defer, sequence, or stagger different policies based on current economic and social conditions,” the firm added.
Citing the recently introduced and suspended cybersecurity levy as an instance, PwC advised the government to adopt scenario planning before any major economic reform is implemented to avoid unwarranted policy reversals.
The current high inflation in Nigeria is driven primarily by the surging costs of food items and this has been attributed to various factors including insecurity, which is discouraging farmers from cultivating.
In May 2024, Nigeria’s food inflation rate reached 40.66 per cent on a year-on-year basis, a significant increase from the 24.82 per cent recorded in May 2023.
It is also higher than the 40.53 per cent recorded in April 2024.
