PricewaterhouseCoopers (PwC) has projected that Nigeria will witness a significant decline in reinvestments, a reversal in revenue growth rate, and decreased profit margins, resulting in lower tax revenues due to current business pressures in 2024.
The company warned that any further increase in taxes would exacerbate the decline in reinvestments and accelerate the potential exit of corporations from Nigeria.
In a 2024 Nigerian economic outlook released yesterday, PwC stated that although GDP may grow marginally by 2.9 percent due to sustained policy reforms, growth prospects could be limited by elevated economic pressures. It stated that fiscal sustainability concerns may remain high, given that debt servicing costs will account for 89 percent of the budgeted fiscal deficit, which is to be financed by new borrowings.
PwC projects a marginal decline in inflation to 29.5 percent by year-end, balancing the effects of reforms, policy actions, external pressures, and food prices, particularly in the year’s second half.
The firm recommended three broad considerations for the government to structure and focus policy efforts to reverse the current economic downturn. “Prioritise macro stability by addressing security, social, and economic pressures such as inflation and exchange rate fluctuations,” PwC stated in the 2024 outlook for Nigeria.
It urged the authorities to mobilise capital to drive growth through market-focused policies and the intensification of investment promotion. It further suggested making short- and long-term sectoral bets focused on exports, domestic substitution, and job creation.
“The government must drive fiscal prudence by optimising spending on capital projects with the highest ROI (return on investment), rationalising public service spending, and improving revenue diversification and collection efficiency.”
PwC also advised the federal government to carefully decide when and how to introduce, defer, sequence, or stagger different policies based on current economic and social conditions. It urged the government to adopt scenario planning before implementing any major economic reforms to avoid unwarranted policy reversals, such as the cybersecurity levy, while embedding contingency plans within any economic policies during the planning phase.
To mitigate the nationwide impact of its policy reforms, the Nigerian government was advised to implement intervention funding schemes to support businesses with low-interest loan programmes or credit guarantees, ensuring companies have access to affordable financing despite high market interest rates.
“Create social safety net programmes such as unemployment benefits and workforce development programmes to absorb job losses from business exits due to economic pressures,” PwC recommended.
It added, “The government may reconsider any planned increase in selected taxes to alleviate financial challenges and unlock liquidity for businesses affected by economic pressures.”