• Sunday, July 14, 2024
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Nigeria Vision 26: 2013

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Nigeria’s “Vision 2020” goal was to become one of the top twenty global economies by output measured by gross domestic product (GDP) by 2020. For some time now, it hasn’t seemed as if Nigeria would achieve that seemingly audacious objective given that we lost some time to a period of economic inertia under Yar’adua and then entered the 2011 elections cycle before policy settled down a bit under the substantive Jonathan presidency. Well now, the recent GDP rebasing exercise means that by mere statistical adjustments and better measurement of our economic activity, Nigeria has become the 26th largest economy in the world and biggest African economy by 2013, and may now be on course to our Vision 2020 target considering our GDP growth rate post-rebasing averaging 6.4%.

GDP rebasing does not imply any increase in national income and productivity. Indeed GDP contrary to lay men perceptions is not a measurement of income, but of economic output and production within an economy. GDP rebasing doesn’t alter our current poor performance in terms of poverty, unemployment and inequality. If a family was poor before the rebasing, it remains poor; the fellow who did not have a job, remains without one; and our wide inequality between the rich (indeed very rich) and the poor persists. In short GDP rebasing doesn’t change the material conditions of individuals, homes and firms within the economy. What the rebasing however does is to give us a more accurate picture of the current state of our economy. It presents a more credible and contemporary report of the state of sectors within the economy and overall activity within the economy. Indeed Nigeria’s GDP rebasing clarifies some previously unresolved incongruities in our economy-for instance why the large global telecommunications companies and sector analysts under-estimated the potential depth and size of the sector pre-digital mobile license auction in 2001or why per capita GDP appeared somewhat larger than previously thought.

I do not see why Nigeria’s GDP re-basing should attract any controversy. It is a commonsense measure consistent with global best practice that simply updates our assumptions and templates for measuring our level of economic output. Continuing to use a base year of 1990 to quantify output in Nigeria contrary to global best practice of rebasing at least every five years would have been irresponsible and incompetent. On the other hand, no one earns any plaudits for merely re-basing GDP just like no one receives commendations for using a time piece that correctly tells the time! I also do not see why anyone should politicize the exercise, positively or negatively. We simply now know the reality about the size of our economy, which is a good thing.

Having said that, there are potential benefits from the GDP rebasing generally and in the particular context of Nigeria-we would now have better economic data for policy analysis and planning. The fact that Nigeria’s GDP means we acquire increased strategic stakes within the context of the global economy, for instance the case for Nigeria being a BRINCS (Brazil, Russia, India, NIGERIA, China, South Africa) economy is probably compelling in the light of us becoming a $510billion economy. The fact that there is more accurate information about sectors and output is good for potential investors, and I mean both international and domestic investors. Financial markets would probably take more interest in the Nigerian economy given our new GDP figures and there are benefits of size (and strategic stakes) in the real politick of global economics, finance and diplomacy. Note however that I said “potential” benefits-GDP rebasing on its own will not deliver these benefits; we will have to position policy and the investment climate to realize these benefits.

Investors may take more interest in our economy as a result of GDP rebasing, but they may yet defer investment if the appropriate reforms to improve competitiveness and the investment climate are not implemented. So other factors remain relevant-infrastructure, purchasing power, ports and customs procedures, corruption, labour markets, judicial system, securing title to property and obtaining building approvals, human capital, security etc. Most importantly the skeptical and cynical response to GDP rebasing by ordinary Nigerians sends a powerful signal to policy makers and the economic elite about the dangers of unemployment, poverty and inequality-large segments of our population do not consider themselves stakeholders in our economy. I hope their cynicism does not evolve into anger and deep disgruntlement (it probably has already) and mutate into revolutionary fervor!

There are substantive insights and implications from the revised GDP figures-the services sector (financial services, ICT, trade, accommodation and food services etc.) now accounts for over 52% of output; with industry contributing 25% and agriculture down to 22%. The new data suggests that the level of manufacturing output was previously under-counted and is now 7% of GDP while we are not surprised that telecommunications is 8.7%. The data suggests a higher level of economic diversification than under the now obsolete GDP series with many more sectors coming into relevance. The figures illustrate how dismal our tax collection is (tax/GDP of 12%) and that our capital markets remain relatively shallow (NSE market capitalization is stated as 15.5% of GDP). On the other hand, debt sustainability ratios have improved significantly. The most important insight from the new GDP figures is that even though our GDP is 26th largest globally, per capital GDP places us No. 121.

Opeyemi Agbaje