• Saturday, July 13, 2024
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BusinessDay

Nigeria’s new GDP: Spotting the difference

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What Nigeria did on Sunday April 6, when the recalculated GDP saw the economy almost double to 80 trillion naira ($509 billion), left many Nigerians puzzled. They are bewildered, confused and are naturally asking questions. In a way, the rebasing of Nigeria’s GDP is like a game of spot the difference, a type of puzzle that requires finding the difference between two otherwise similar images.

However, the picture that emerged on Sunday is not an altered or manipulated picture. The revised GDP figures were arrived by sampling 851,628 companies 46 economic activities. The result is like a revised or recalibrated map: a sharper, truer picture of a well travelled path. For example, a picture of Lekki in 1990 will not reflect the incredible change that has occurred in the past 20 years.

The revised sets of data are not the result of statistical 419. It shows what die-hard Nigerian optimists have always bragged and complained about: Nigeria is Africa’s economic giant albeit with clay feet. Yes, corruption, blackouts and insecurity are rife. It’s true that majority of Nigerians, even after GDP per capita increased to $2, 258 from $1,437, are poor. It’s palpably evident that the impressive growth in GDP has not generated enough jobs.

Puzzles test problem solving skills. To solve puzzles one must put the pieces together logically in order to get a current picture, to recognise patterns. In that sense the new figures have actually solved many puzzles about the Nigerian economy. The GDP-boosting potential of Nollywood, a bootstrap upstart that has become a prolific trillion naira upstart, has been finally captured.

Twenty-four years is long time in the lifecycle of an economy. Economies are dynamic. They go through cycles of boom and bust, some sectors decline, new industries emerge. Countries therefore revise their GDP to update the dynamism of their economy. In Nigeria, crude petroleum and natural gas, agriculture and mining and quarrying no longer hold sway. Economic activity in Information and Communication boosted the new GDP benchmark by 5.56 trillion naira. Over-half of the economic activity in Nigeria is concentrated in services.

Six sectors – crop production, trade, crude petroleum and natural gas, telecommunications and information services, real estate, food, beverages and tobacco – account for 70 percent of the new nominal GDP.  Now we know the companies and markets driving the economy. We also know that the top three services are wholesale and retail trade, telecoms and real estate. In summary, our economy today is a far cry from 1990s when Nitel, the state-owned sole provider of telephone services proudly owned 300,000 fixed lines. Today there are 110 million registered SIM cards.

For investors and policymakers, who certainly understand that “You can’t control what you can’t measure”, the revised figures are a means to an end: better allocation of capital and improved planning respectively. Investors and analysts poring through the data have identified growth opportunities for banks, cement companies and fast moving consumer goods (FMCGs).

For government the data gathered reveals gaps in its fiscal revenues e.g. Nigeria’s tax-to-GDP plunged to 14 percent from 26 percent, much lower than the average for sub-Saharan Africa. The federal government will get more aggressive with tax collection; an opportunity to rewrite Nigeria’s social contract of “don’t tax, don’t ask” i.e. don’t tax us and we won’t ask where all the billions of petrodollars goes.

Overall, a better economic picture of Nigeria shows the structure of the economy has changed; that it is larger and more diversified than many thought. We commend Yemi Kale, Statistician General of the National Bureau of Statistics (NBS) and Ngozi Okonjo-Iweala, the Coordinating Minister for the Economy and Minister of Finance, for this tedious but hopefully rewarding work.