Nigeria’s may see a major collapse in its Gross Domestic Product (GDP) for the first quarter (Q1), of 2023, as a result of the negative impact of the Central Bank of Nigeria’s (CBN), Naira redesign policy on cash availability.
“I am estimating a reduction in Q1 2023 nominal GDP by between N10-15 trillion due to challenges sourcing cash in Q1 2023,” Yemi Kale, a former Statistician General of the National Bureau of Statistics (NBS) said.
” This is because about 40% of Nigeria’s N198tn GDP in 2022 is informal of which about 90% is cash based. Further 30% of formal sector GDP is cash based. This means N106.9tn of total GDP is cash based.”
Kale added that of the 46 economic activities, agriculture, some manufacturing activities (especially food & beverage, textiles, apparels), trade, arts entertainment & recreation, accommodation & food services, road and water transport and other services, are expected to be the most affected.
The CBN should have done a cost benefit analysis looking at the overall impact of any policy and how and when it is to be implemented, across the economy, not just in one or a few areas and deciding if overall, the benefits outweigh costs, and if yes then the costs are acceptable, Kale said.
Any superficial gain from the policy such as a slowdown in inflation will come about, not because of an increase in output of goods and services above available cash to spend but because of lack of cash to chase more of less same amount of goods, Kale added.
The CPI is about 50% food of which several are perishable in the absence of storage.
“Recall employment is also tied to GDP growth, so a slowdown in growth will have a negative impact on employment. On the other hand, both a reduction in inflation and growth in GDP can improve poverty rates,” Kale said.
Nigeria’s Gross Domestic Product (GDP) growth rate expanded by 3.52% in the fourth quarter (Q4) of 2022.
Overall growth fell to 3.10 per cent in 2022 from 3.40 per cent in 2021 according to new GDP results from the National Bureau of Statistics.