Nigeria’s GDP rebasing: No cause for celebration (2)

A comparison of other key economic indicators of performance shows Nigeria as lagging behind South Africa. For example, 63.1 percent of Nigeria’s 173.2 million (2013) population live on less than $1.25 per day compared to 27.0 percent of South Africa’s population of 52.3 million. Nigeria’s rebased GDP per capita is $3,021.3 while South Africa’s per capita GDP doubles that at $6,618.0, placing the two countries as 129th and 89th, respectively, among world countries on per capita income basis. Nigeria produces 27 billion Kilowatt hours (KWH) of electricity and consumes only 149 KWH per capita while South Africa produces 259.6 billion KWH and consumes 4,604 KWH per capita. Nigeria’s tax revenue as a percentage of GDP is only 2.7 percent while that of South Africa is 26.4 percent. South Africa’s manufacturing share of GDP is twice that of Nigeria. Also, while manufactured exports represent 45 percent of South Africa’s exports, it is only 3 percent for Nigeria. In the sphere of gross national investment, South Africa still performs better than Nigeria. Even though Nigeria had an edge in gross national savings pre-rebasing, a large proportion of the savings is not translated into national investment. Consequently, Nigeria has not been meeting the investment requirements and projected growth rates to realize Nigeria Vision 20:2020. Importantly, too, if South Africa follows Nigeria’s example to rebase its GDP to also “add previously excluded activities, and give a more accurate picture of the size and conditions within its economy”, then, Nigeria’s present status of having Africa’s largest economy may become temporary.

Thus, for the government, it would appear that a major expectation of the rebasing exercise was that it would shoot up the size of the economy in terms of GDP such that the country would be able to leapfrog its movement into the league of top 20 economies. Yes, the size of the GDP has increased on paper. And this is neither here nor there. The challenges to achieving Nigeria Vision 20:2020 goals and targets remain enormous considering the economic performance in the last few years of implementation of the Vision Plans and the prospects which are not encouraging.

One binding constraint to meaningful structural transformation of the economy through industrial development and realizing Vision 20:2020 is poor electricity generation and distribution in the country. Even though the government has in place a power sector road map and huge sums of budgetary allocations are being made to the power sector, the possibility of a quantum leap in power supply materializing is low judging by past experience. Today the government celebrates power generation of 4,500 MW and actual availability of less than 2,000 MW. The power sector had been allowed to deteriorate continuously for a long time such that stakeholders are perplexed and pessimistic about the power situation. And industry operators have groaned for a long time because of the inadequate and epileptic power supply which has jacked up their costs of production, limited their outputs and competitiveness, and led to frustrations. Since 1999, there has been so much talk by successive governments of ensuring adequate power supply. Huge sums of money have allegedly been spent. Yet, the nation is continuously in darkness. Interventions to address the power problem have been something like motion without movement.

Besides, Nigeria’s large population noted above will continue to militate against it compared, for example, with South Africa’s relatively small population. Thus, even though the rebasing has enabled the country to achieve increased GDP size, the increase may not be enough to push the economy into the league of the top 20 economies in the world, unless further rebasing exercises are undertaken for the purpose of joining the club of top 20 economies. In that case, the outcomes of the exercises would be artificial without any real impact. Also, the country’s basic economic structure will not change much and most of its challenges will remain.

It was perhaps an uncomfortable coincidence that at a time when there were debates as to the feasibility of realizing the NV 20:2020 economic targets, the GDP had to be rebased with implication of increasing the size without any change in the quantity of goods and services produced or living conditions of the people, even though there may have been a false sense of improved welfare due to the upward adjustment of per capita income. The rebasing should therefore not have been interpreted politically to mean achievement and hence warranting celebration. Focus should really not be on becoming a member of the top 20 economies per se through merely rebasing the GDP. Rather, focus should be on how to make the economy acquire the transformational features of those economies that are in the league of the top 20, and also how to achieve broad-based and inclusive growth that will create jobs, reduce poverty and ensure equitable distribution of the nation’s wealth in contrast to the prevailing scandalous inequalities in the country.

Mike I. Obadan