We all witnessed the over-night shoot up of the Nigerian Gross Domestic Product, GDP, overtaking some of the major economies of the world and becoming the largest in Africa. As interesting as it sounded, the populace is still skeptical on the development raising more question for the Federal Bureau of Statistics than it may have expected. Some are asking; does it mean that Nigerian economy has grown more than that of South Africa? Can we now compete with Japan and china or are we no longer in the third world?
Most people suspected this fact going by the mere size of the population of the country, its land mass, mineral endowment and other key indices that Nigeria should be the largest economy in Africa. An immediate discernible indicator in this regard is the way some particular businesses have blossomed including retail and telecommunications.
Gross Domestic Product, GDP, represents the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment, government spending plans and the value of exports less the value of imports. This encompasses all goods and services produced within the geographical boundaries of a nation, regardless of the producers’ nationality, while Gross National Product, GNP does not include goods and services produced by foreigners.
GDP rebasing is therefore the process of replacing old base year price structure in compiling volume measures of GDP with a new or more recent base year, usually at five years average interval. The last time Nigeria undertook the rebasing of her economy was 24 years ago, with total nominal GDP ranging from 59.5 per cent. With these it was pertinent that the GDP is rebased but one may need to ask, why is it took the nation so long to conduct the exercise that is supposed to be at least in a five year interval.
The authorities argued that the delay was strategic; that since the country was attempting to negotiate debt relief with its creditors that it would amount to putting spanners in the works if the country rebased in the intervening period which would catapult it from low income to a mid income country making it ineligible for debt relief including outright debt write off. This explanation sounds plausible and does clearly resonate with common sense. But the question that comes to mind is why the exercise was not embarked upon soon after the relief was obtained. Part of the problem is that not much importance was attached to this exercise and there could also be the issue of gap in available capacity to undertake the assignment. But the moral of the situation which we must take on board is that we must never again allow any delays to be experienced in undertaking this assignment.
The Statistician General of the Federation, Dr. Yemi Kale, said the project is coming at an auspicious time after over 23 years of the last exercise, and is designed to help in updating Nigeria’s GDP in a way that would reflect the accurate value added of the goods and services produced in all sectors of the economy.
According to him, the NBS is embarked on the rebasing year from the current 1990 because the data sources and use of proxies are set in the base year, the need to make the base year structure more representative of the economy since consumption and production patterns change over time and the need to properly capture the changes in patterns and classification of sector, sub-sectors and their regrouping due to the adoption of the latest System of National Accounts (SNA) of the United Nations
With the rebasing, Nigeria’s revised GDP for 2013 stood at N80.2 trillion (or US$509.9 billion) representing an increase of about 89% based on the old GDP estimates for 2013 which was N42.4 trillion (or US$269.5 billion). The new GDP numbers do not also mean that Nigeria is suddenly richer overnight. We are simply measuring our economic activity better.
As a result of the rebased GDP estimates, Nigeria is now ranked the 26th largest economy in the world, and the largest economy in Africa. It now has peer countries such as: Argentina (ranked #25), Austria (ranked #27), and South Africa (ranked #28).
However, given our large population, Nigeria’s GDP per capita (i.e. GDP divided by total population) still remains low. After rebasing, the GDP per capita increased from US$1555 to US$2,688. On this per capita basis, Nigeria is now ranked as 121st in the world, rising from a previous 135th position. By comparison, South Africa has a higher per capita GDP of US$7507, and is ranked 69th in the world for per capita incomes.
The new results showed that the Nigerian economy is more diversified than previously reported, and the structure of the Nigerian economy has also changed significantly. Previously, agriculture comprised 33% of GDP, whereas services accounted for 26% of GDP. With the new GDP results, agriculture now accounts for 22% of GDP, while the services sector has increased to 51% of GDP. The services sector covers activities such as: transportation, information and communications, arts and entertainment, financial and insurance services, real estate, public administration, education and health services.
The rebased numbers for some other important sectors in the economy are as follows: oil & gas (15.9%), manufacturing (6.7%), telecoms (8.7%), and Nollywood (1.2%).
According to international norms, all countries typically rebase their GDP statistics every 5 years in order to better capture information on economic activity. For example, Ghana recently rebased its GDP in 2010. In the case of Nigeria, our GDP had not been rebased since 1990. The structure of Nigeria’s economy had changed significantly since 1990 with the rapid growth and emergence of sectors such as: telecoms and the movie and entertainment industry (Nollywood).
The new results indicate that Nigeria’s economy is more diversified than previously reported, further supporting the Government’s recent diversification efforts. We will continue with our policies to support our diversification in agriculture, in manufacturing, in housing & construction, in the creative sectors, and so on. We will also put more emphasis on supporting small businesses as they transition from the informal to the formal sector, by improving infrastructure, access to finance, and skills development.
The release of the rebased GDP data is part of a broader push by this Administration to improve and update Nigeria’s statistics. We will continue to support the National Bureau of Statistics (NBS) to update our social and economic statistics in areas such as agriculture, poverty survey and job creation.
The benefit of this exercise as observed by the IMF representative in the country who also stood in for the World Bank as well as the African Development Bank could be found in the fact that the country has taken a major first step in its effort to make reliable data available to better inform policy decisions. There is the advantage of comparability with the rest of the world and also no doubt there will be some perception advantage which could be found on the part of foreign investors as they take decisions regarding the destination of investment dollar.
Some critical indices no doubt have been altered as a result of this effort. For instance the debt/GDP ratio at 11 per cent would seem to suggest that there is slack in the borrowing capacity of the country which had made the Coordinating Minister of the economy to caution that this would not mean that the country will now embark on borrowing jamboree. We also would look good if we consider some other indices such as deficit/GDP ratio but not so good if we consider non oil revenue/GDP ratio. It is also a fact that the rate of growth of the economy will be slowed down based on the fact of the increased GDP measure.
As some analysts have rightly pointed out, rebasing as a means to an end and not an end itself, thus, Nigeria has to maintain its position by working on some components of the economy. For instance, there should be a measure to boost its per capita income which is still very low compared to the international standard, and there must be a way of reducing the gap between the rich and the poor. Also keen is that the Nigerian government should provide a conducive environment for investors thereby creating job for the unemployed. The government should also encourage SME’s and try to diversify its source of revenue. Possibly, little attention should be given to oil sector while the neglected sectors like, agriculture tourism and entertainment should be encouraged. Without all these in place the rebasing has no impact on the common man.
Gabriel Otu is a Lagos based financial analyst. Email @ jubrilprince@yahoo.com
