Oyeyemi Kale, former Statistician-General of the Federation, says Nigeria’s gross domestic product (GDP) would contract in the first quarter (Q1) of 2023, due to the naira redesign policy of the Central Bank of Nigeria.
In a series of tweets on Tuesday, Kale, who is now chief economist at KPMG Nigeria, projected that the country’s GDP would reduce by about N10 trillion to N15 trillion due to the CBN currency redesign policy which led to a nationwide cash scarcity.
The economist, who served at the CEO of National Bureau of Statistics (NBS) from 2011 to 2021, said this would affect Nigeria’s total GDP which stood at N198 trillion in 2022, as most sectors are cash-based.
“I am estimating a reduction in Q1 2023 nominal GDP by between N10-15 trillion due to challenges sourcing cash in Q1 2023,” Kale tweeted.
“This is because about 40 percent of Nigeria’s N198 trillion GDP in 2022 is informal of which about 90 percent is cash-based. Further 30 percent of formal sector GDP is cash-based. This means N106.9 trillion of the total too is cash-based.
“There is nothing new or wrong about currency redesign or cashless policy if done for the right reasons and at the right time. But every policy will have pros and cons and will benefit some but not others. There is no policy that won’t affect someone negatively. Or that won’t have costs.
“Of the 46 economic activities, agriculture, some manufacturing activities (especially food and beverage, textiles, apparels), trade, arts entertainment and recreation, accommodation and food services, road and water transport and other services are expected to be the 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 to be implemented, across the economy and not just in one or a few areas and deciding if overall, the benefits outweigh costs. If yes then the costs are acceptable.”
Kale argued that when such policies are introduced, palliatives should be set aside to reduce its negative effect.
“A policymaker can or should introduce palliatives to make the costs bearable to those that will be negatively affected by its implementation,” he said.
“If the result of analysis is the implementation of the policy and its implementation will be more detrimental to the entire system than beneficial even if it benefits a particular area or sector then it clearly isn’t a good idea to go ahead.”