Nigeria’s rebased GDP: Time for real change

As Nigeria prepares to unveil its rebased Gross Domestic Product (GDP) figures, policymakers and investors should exercise caution against misinterpretation. The exercise, aimed at capturing new and evolving sectors, is a necessary statistical update. However, it risks becoming a tool for presenting a distorted picture of economic stability and fiscal prudence.

“A higher GDP figure may create an illusion of progress, but without targeted policies to stimulate industrial output, curb inflationary pressures, and manage public debt effectively, the rebased GDP remains a mere statistical adjustment rather than a genuine indicator of economic advancement.”

The latest rebasing, which shifts the base year from 2010 to 2019, acknowledges the rise of fintech, digital commerce, and outsourced employment—sectors that have undoubtedly reshaped Nigeria’s economic landscape. This statistical update aims to provide a more accurate reflection of contemporary economic realities, capturing industries that have flourished over the past decade. However, while these sectors contribute to economic activity, their growth does not necessarily translate to widespread prosperity. The underlying economic challenges—runaway inflation, excessive borrowing, sluggish industrial growth, and a widening income gap—remain unaddressed, casting doubt on the true health of the economy.

A higher GDP figure may create an illusion of progress, but without targeted policies to stimulate industrial output, curb inflationary pressures, and manage public debt effectively, the rebased GDP remains a mere statistical adjustment rather than a genuine indicator of economic advancement. It is imperative that policymakers move beyond numerical recalibrations and implement structural reforms that translate economic figures into tangible improvements in the livelihoods of ordinary Nigerians.

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GDP rebasing alters key macroeconomic indicators such as debt-to-GDP and tax-to-GDP ratios, often creating the illusion of fiscal space. A higher GDP denominator will inevitably reduce these ratios, offering policymakers a misleading narrative that Nigeria’s debt burden is manageable. However, such statistical changes do not translate into improved revenue generation or enhanced debt sustainability.

Despite the anticipated drop in the debt-to-GDP ratio, Nigeria’s reliance on borrowing remains a concern. The government has continuously resorted to debt financing for recurrent expenditures, often with little impact on productivity. Unless fundamental reforms in fiscal discipline and revenue collection are pursued, a revised debt ratio does little to change the reality of an over-leveraged economy.

Similarly, the reduction in the tax-to-GDP ratio post-rebasing may trigger calls for higher taxation. However, Nigeria’s tax system remains inefficient, heavily dependent on formal businesses and wage earners, while vast informal and illicit economic activities escape taxation. Raising taxes without broadening the tax base and improving compliance risks further strains businesses and households already grappling with high inflation.

One contentious aspect of the rebasing exercise is the inclusion of underground economic activities, including those that exist in legal grey areas. While this may provide a more comprehensive snapshot of the economy, it also raises questions about how Nigeria defines and fosters sustainable economic growth.

While GDP rebasing is an internationally recognised practice, Nigeria must ensure that the process is not used as a substitute for addressing fundamental economic weaknesses. It should not be leveraged to justify additional borrowing or mask the country’s fiscal vulnerabilities.

Rather than celebrate a statistical revision, Nigeria’s policymakers must focus on real economic transformation. Job creation, industrial productivity, and fiscal discipline should take precedence over numerical adjustments. Investors and international partners will see through a rebased GDP if structural deficiencies remain unresolved.

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GDP rebasing should serve as a catalyst for more effective and targeted policymaking, not a mere exercise in statistical manipulation. While a higher GDP figure may paint a picture of economic expansion, it does not automatically translate into improved living standards for ordinary Nigerians. The reality for many remains a struggle with rising costs of living, limited employment opportunities, and inadequate access to essential services.

To truly unlock the potential of the rebased GDP and ensure that economic growth benefits all citizens, Nigeria must prioritise a comprehensive and sustained reform agenda. This should include strengthening governance structures, improving transparency and accountability, and fostering a more conducive environment for private sector investment.

Furthermore, a robust and equitable tax system is crucial. This necessitates broadening the tax base to include the informal sector, improving tax collection efficiency, and ensuring that tax revenues are utilised effectively and transparently to fund public services and infrastructure development.

Ultimately, the success of the rebased GDP will be measured not by the size of the number but by its impact on the lives of ordinary Nigerians. Only by addressing the root causes of poverty, inequality, and underdevelopment can Nigeria truly harness the potential of its economy and build a more prosperous and inclusive future for all its citizens.