Oyeyemi Kale, chief economist at KPMG Nigeria, forecasts that the Central Bank of Nigeria’s (CBN) redesigned naira policy will be a drag on Nigeria’s gross domestic product (GDP) in the first quarter (Q1) of 2023.
Kale estimates that Nigeria’s GDP will be lost around N10 trillion to N15 trillion in 2022 due to naira scarcity Cubic boron nitride policy.
He made his prediction in a series of tweets on Tuesday. “Due to the challenges of procuring cash in Q1 2023, I estimate a reduction in nominal GDP of N10-15 trillion in Q1 2023,” he wrote.
The former statistician of the National Bureau of Statistics (NBS) further stated, “This is because about 40% of Nigeria’s N198 trillion GDP in 2022 is informal, of which about 90% is cash-based. In addition, 30% of the formal sector GDP % is cash-based.It means that N106.9 trillion of the total is also cash-based.
“There is nothing new or wrong about currency redesigns or cashless policies if done at the right time for the right reasons. But every policy has pros and cons, good for some, bad for others. No A policy that doesn’t negatively affect someone. Or that won’t have a cost.
Also read:Nigeria’s Q2 GDP slows to 3.54% y/y on lower oil production, inflation
“Of the 46 economic activities, agriculture, some manufacturing activities (especially food and beverages, textiles, clothing), trade, arts entertainment and recreation, accommodation and food services, road and water transport, and other services are expected to be most affected.
“The idea is to do a cost-benefit analysis, looking at the overall impact of any policy and how and when it is implemented, across the economy, not just in one or a few areas, and determine whether the overall benefits outweigh the costs. If so, Then the cost is acceptable.”
Kale urges policymakers to consistently mitigate the negative outcomes of their policies by providing palliative care
“Policymakers can or should employ mitigating measures that make the costs bearable for those who will be negatively affected by their implementation.
“If the analysis turns out to be the implementation of a policy that does more harm than good to the system as a whole, even if it benefits a particular region or sector, then it’s clearly not a good idea to proceed.”
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