Nigeria’s GDP rebasing: No cause for celebration (1)

In April 2014, Nigeria’s statistical agency, the National Bureau of Statistics, released the preliminary estimates of the nominal gross domestic product (GDP) for 2010, 2011 and 2012 and forecast figures for 2013 following a GDP rebasing exercise. About two months later, the agency released what it described as revised and final GDP rebasing results which included Nigeria’s real GDP or GDP at constant prices. Then, on 27th August, 2014, the Bureau released the final report on Nigerian Gross Domestic Product Rebasing (Expenditure Approach), 2010-2013. The earlier rebased figures were derived from the output or value added approach to GDP measurement. Rebasing was indicated to be a routine exercise undertaken by countries every five years to recalculate a nation’s GDP by replacing the old base year used for compiling the volume measures (of GDP) with a new and more recent base year or price structure. In the exercise, the new base year for Nigeria’s GDP is 2010, thus replacing the 1990 base year that was used last.

The case for the exercise was predicated on the need to enable policy makers and analysts obtain a more accurate set of economic statistics for the purpose of enhancing evidence-based decision-making, and also have more accurate information on the size and structure of the economy arising from the incorporation of new activities in the computational framework. In this direction, the new activities which were included in the re-computation framework include entertainment, research, patents and copyrights, etc, reflecting a broader coverage of the services sector particularly the informal sector.

But the issue here is that not long after the preliminary results of the GDP re-estimation were announced, the government and its senior officials began to celebrate the outcomes. The size of the Nigerian economy, measured by the size of the nominal GDP, had shot up significantly from $226 billion in 2010 (without rebasing) to the rebased figure of $510 billion in 2013, representing 126 percent increase. Between 2010 and 2013 the rebased figures show 41.4 percent increase. When the rebased figures are compared with the un-rebased figures the percent increases are 59.5 percent (2010), 69.1 percent (2011), 75.6 percent (2012), and 89.2 percent (2013). Also, the final GDP rebasing results, by the output approach, showed that Nigeria’s real GDP or GDP at constant prices in 2013 stood at $407.85 billion (N63.218 trillion). Real GDP represents nominal GDP adjusted for inflation and expressed at the prices prevailing in a particular year. By factoring out inflation, the real GDP is necessarily lower than the nominal GDP but the figures represent phenomenal increase compared to the un-rebased real GDP.

As a consequence of the reported increase in the size of the GDP, the country’s per capita GDP increased to about $3,000 from its level of about $1,526 in 2012, but the pitiable living conditions of majority of the people have not changed. To the majority of Nigerians, life, to use a well-known cliché, is short, nasty and brutish. Furthermore, consequent upon the rebasing, the Nigerian economy is said to have witnessed a stronger diversification than previously with the number of economic activities contributing over 70 percent of GDP rising from three to six. The structure of the Nigerian economy now shows a significant change, reflecting a decline in the share of agricultural sector, industry, crude oil and natural gas, and a rise in the share of services including telecommunications in nominal GDP, thus suggesting that the economy has acquired a developed status by skipping the industrial development stage in the structural transformation process. It may be recalled that the country’s industrial sector has been comatose with very poor contribution to the gross national output! One may then be tempted to say that the reported structural transformation of the Nigerian economy reflects a feat when considered in relation to the process of economic development of the industrialised countries.

However, the aspect of the GDP rebasing which government officials began to celebrate immediately is the remarkable increase in the size of the nominal GDP to $510 billion, pointing out that it elevated Nigeria to the position of the largest economy in Africa, overtaking South Africa whose GDP in 2013 stood at $350 billion. With these figures, Nigeria was ranked by the World Bank as having the 26th largest economy in the world in 2013 and South Africa 33rd. In the IMF ranking, the Nigerian economy was 24th while the South African economy was 33rd. In the United Nations ranking, the Nigerian economy was 23rd while South Africa’s was 29th in the world. Thus, with the UN’s ranking, the Nigerian economy is almost in the league of the top 20 economies, yet the economy is in a much worse shape than ever. Besides, with rebasing the Nigerian economy may have beaten the South African economy to the second place in Africa, and also seems to be better on the world ranking. But this is where the apparent advantage ends.

Mike I. Obadan