Household consumption spending reduced by 9 per cent between January and March 2023, macroeconomic snapshot, KPMG, has said in a report.
“We are estimating a year-on-year contraction in nominal household consumption expenditure by 9 per cent in Q1 2023 following these challenges,” it said.
It noted that this is as businesses faced substantial challenges on both the demand and supply sides.
“On the demand side, the combination of higher taxes on goods and services, hyperinflation which averaged 21.9 per cent in Q1 2023, monetary policy targeting demand to control inflation, and the cash shortages and disruptions in the electronic payment channels following the naira redesign policy constrained consumer demand,” it said.
“On the supply side, high cost of financing with the CBN interest rate hikes, higher energy costs, transport and distribution costs, and higher input costs especially given FX unavailability and instability, have also increased costs substantially year on year.
“Purchaser Manager Indices covering Q1 2023 had also shown persistent declining trends with some levels lower than what was obtained during the COVID-19 pandemic when the economy contracted and eventually entered a recession,” it added.
KPMG maintained its earlier estimate of a N10-15 trillion drop in nominal GDP and a Q1 real GDP growth of between 1.5 per cent – 2.0 per cent, given that there will be slower consumer demand and reduced earnings for businesses and, at the same time, rising costs of their operations.
This will, however, be largely dependent on if the oil sector can reverse its 11-quarter-long contraction, warning that further contraction from the oil sector may result in Q1 2023 real GDP growth of -0.23 per cent – 1.18 per cent.
