The Business NG - July 15, 2024

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Some financial analysts have sounded the alarm on Nigeria's economic outlook, warning that the government's increasing reliance on debt instruments without corresponding revenue-generating investments could lead to a fiscal crisis. In its latest report, PwC notes that the imbalance between government spending and revenue will likely persist in 2024, jeopardizing fiscal sustainability. The report highlights the detrimental effects of recent economic reforms, including rapid naira devaluation, rising interest rates, and surging inflation, which have combined to create adverse shocks for businesses and households. PwC cautions against further tax increases, suggesting that such measures would only exacerbate existing difficulties. Instead, the consulting firm recommends that the government reevaluate its taxation policies, prioritize macroeconomic stability, and drive fiscal prudence by optimizing spending on capital projects with the highest ROI. Additionally, PwC suggests implementing financial intervention schemes and social safety net programs to mitigate the impact of economic reforms. The report projects a marginal reduction in inflationary pressures towards the end of 2024, stabilizing at around 29.5%, and a 2.9% GDP expansion in the second half of the year. However, PwC warns that growth potential could be restrained by lingering economic pressures. Overall, the report emphasizes the need for a structured and focused policy approach, policy flexibility, and mitigation of policy impacts to navigate the challenges ahead.