Economist and Partner at KPMG West Africa, Oluwole Adelokun, has said that the global supply chain headwinds have slightly improved, leading to a forecasted growth in local trade by 2.4% this year and 3.5% next year.
Adelokun In an interview with Arise News,he said the global supply chain headwinds has slightly eased, paving the way for a predicted growth in local trade.
Adelokun stated,”The reason why we noted that the headwinds has slightly improved is because the global dynamics that impact the world in 2023, based on the global supply chain, has continued to ease, and trade has begun to pick up.”
“According to the AIO report, local trade is forecasted to grow by 2.4% this year and further strengthen to 3.5% next year, a significant improvement from last year’s negative growth rate of 0.9%,” he said.
Adelokun also predicted a downward trend in inflation rate by the end of the year, citing the base effect and the Central Bank of Nigeria’s inflation-targeting policy.
“Our view is that as you think about the macro environment and you narrow down on inflation as you go towards the end of the year, the second half into third quarter, we should begin to see a downward trend, that’s our point of view,” he said.
However, Adelokun noted that the depreciation in exchange rate poses a significant risk to the outlook, with a pass-through effect on businesses and households.
“If you look at our global outlook economic report, one of the things we noted very clearly is that the biggest risk to the outlook is the depreciation in the exchange rate.
“So we do understand and recognise that the depreciation in exchange rate would have a pass-through effect on businesses and households,”he said.
He said, the Dangote refinery, while a strategic investment, is not a silver bullet for addressing inflation and fuel scarcity.
“The silver bullet is not the Dangote refinery, our view is that as you look at the inflation environment in Nigeria the major component is the food inflation.
“We view the Dangote refinery as a strategic investment in the right direction, but we believe its impact on prices will be limited.
“The refinery’s input, crude oil, is an international commodity traded outside Nigeria’s control, so we don’t expect a significant drop in goods and services prices.
“There may be a slight reduction, similar to the 30-40% drop seen when Dangote refinery’s diesel entered the market, but the refinery is not the silver bullet.
“The main driver of inflation in Nigeria is food inflation. To address prices, the government needs to tackle structural challenges impacting food costs.
“The ability to dismantle the barriers that impact supply is actually the solution to prices in Nigeria.
“Government needs to be strategic around that, they need to take bold steps to deal with all the structural challenges impacting cost of food in the country.
“While the Dangote refinery would help earn dollars and reduce transportation costs, it’s not the ultimate solution,” Adelokun said.
Adelokun concluded that the government needs to conduct a detailed value chain analysis from production to logistics and transportation to resolve the challenges regarding supply.
“To resolve supply challenges, the government must conduct a detailed value chain analysis, from production to input, packaging, processing, logistics, and transportation,”he said.
Boluwatife Enome
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