GDP rebasing: Is it all about size?

When the National Bureau of Statistics (NBS) releases the rebased Gross Domestic Product (GDP) for Nigeria, most likely in early 2014, it will show that Nigeria has become the largest economy in Africa, thus ahead of South Africa.

With an upward revision by over 50 per cent capturing emerging and valuable sector contributions from Information Technology and the vibrant movie industry, and taking into consideration growth and decline in the contribution of all the major sectors of the economy, it is estimated that a new GDP rebased on 2010 figures will make Nigeria have a GDP of $405 billion much more than that of South Africa which hovers around $370 billion.

The NBS sought to change the calculations of Nigeria’s GDP, using a new base year of 2010 to give a better indication of the size and composition of the economy.

 It is common for governments  to overhaul GDP calculations every few years to reflect changes in output and consumption, such as telecoms, financial services and internet usage, but Nigeria has not done so since 1990 (about 23 years) suggesting that the previous GDP framework underestimated economic activity.

 It is expected that the new GDP figure will have new implications for investors’ perception of Nigeria’s economy and the country’s overall rating among the comity of nations.

 With this GDP rebasing the contributions of Nigeria’s agricultural sector will definitely shrink from around 40 percent of GDP to 25 – 30 percent of GDP, confirming the growth of other sectors and activities in the last two decades.

Also, public debt generally will also shrink from the current 20 per cent of GDP to 13 per cent. Public external debt would be below 2 percent of GDP, while the current account surplus may still be 5 percent of GDP. Analysts project that Nigeria’s debt, budget and current account ratios will look among the best in Africa and in the emerging markets (EM), once the rebased figures are released.

But beyond the issue of capturing the actual size of the country’s economy, and posturing Nigeria as a large economy, (which cannot be argued even with current GDP calculations) it is disturbing that a new rebased GDP will not show that Nigeria’s economy is better managed towards an overall inclusive growth, or will the huge leakage in the economy fuelled by unbridled corruption disappear?

While we commend the initiative to rebase the country’s GDP calculations for the sake of creating a more realistic assessment of the overall size  and strength of the economy and the differential sectoral contributions, government at all levels should tackle and overcome all the bottlenecks that frustrate translating Nigeria’s economic size into a positive inclusive growth that impacts positively on the living standards of most Nigerians.

Thorny issues of high youth unemployment, increasing trend of poorly skilled products of the educational system, stifling business environment and decrepit social, economic and physical infrastructure, and unbridled corruption that creates a huge leakage that pauperizes the majority and enriches a few, should engage leadership at all levels.

We believe that while capturing size is important, efficiency, and relevance  of the economy to the well being of Nigerians should be an overriding consideration and pursuit.