Nigeria’s controversial Economic Index

0
393

The rating of Nigeria, India, China, Bangladesh, Democratic Republic of Congo as countries with the highest number of extremely poor people in the World by World Bank rubbishes Nigeria’s current GDP, writes James Obute

Nigeria’s recalculated economy is worth $510 billion, by far the biggest in Africa and easily surpassing that of previous continental titleholder, South Africa, at $353 billion. This was disclosed by National Bureau of Statistics on Sunday April 7. However, controversies continue to trail the GDP as announced by the NBS.

 

Figures announced Sunday are the first recount since 1990 of the GDP of Africa’s biggest oil producer but do little for the 112 million Nigerians scrabbling to survive in poverty. However, , the pronouncement by the World Bank President appears to have removed the sail from government’s wind, as it highlighted the disconnect between government’s statistics and economic reality.

The World Bank President, Jim Yong Kim, who was addressing participants at the Council on Foreign Relations, CFR, meeting in New York, named India, China, Bangladesh, and the Democratic Republic of Congo as the other countries in the new global poverty categorization. “The fact is that two-thirds of the world’s extreme poor are concentrated in just five countries – India, China, Nigeria, Bangladesh, and the Democratic Republic of Congo,” he said.

“If you add another five countries — Indonesia, Pakistan, Tanzania, Ethiopia, and Kenya – the total grows to 80 percent of the extreme poor.”

Mr. Kim, who defined extreme poverty as “people living on less than $1.25 a day”, said “more than a billion people in the world live on less than that each day.” The International Monetary Fund had used the 1990 base to estimate Nigeria’s GDP in 2013 at $292 billion. But that did not take into account new industries like telecommunications, information technology, music, airlines, burgeoning online retail outlets and Nollywood film production that didn’t exist when the last GDP count was made in 1990. Then, there were 300,000 landlines. Today, Nigeria has about 100 million cell phone users.

Rebasing is defined by the United Nations as the “process of replacing present price structure (base year) to compile volume measures of GDP with a new or more recent base year.” While nominal GDP, which has its uses, is the sum value of all produced goods and services at current prices, real GDP is more widely used and is slightly different as it’s the sum value of all produced goods and services at constant prices and is useful for showing how the economy changes in size and – with some further manipulation – how average living standards change over time.

The new base year for arriving at new rebased nominal GDP was 2010 and it was based on the latest system of national accounts 2008 from 1993 previously; as well as the international standard of industrial classification 4.0 from the previous 3.1. Also, the list of activities captured under the new standard increased to 46 from 33 previously.

The strategy of delaying the rebasing worked as Obasanjo administration’s pursuit of debt relief was successful. Nigeria got a discounted offer to pay $12 billion within one year instead of $30 billion with interest and compound to be paid in 33 years. Nigeria paid off the debt and today enjoys one of the lowest debt to GDP Ratios. Since that debt relief, Nigeria’s GDP growth has been one of the highest in Africa and the world averaging 7 per cent per year. The Finance Minister then was Ngozi Okonjo – Iweala and she is today overseeing the new figures making Nigeria Africa’s largest economy. South Africa, Ghana and Zambia are among african nations who recently rebased their GDP.

It is also being projected that the exercise will be mixed for Nigeria’s fiscal stance. Though it will improve the debt-to-GDP ratio, currently less than 20 per cent, it will expose a weaker tax base. “The impact of a rebasing would likely have a positive impact on perceptions. This would come at a time when most investors are fairly downbeat on South Africa, because of its high combined fiscal and current account deficit,” said London-based economist for CSL Stockbrokers, Alan Cameron.

He said: “A revision to the base year would improve Nigeria’s budget deficit and debt ratios, as well the relative size of the import burden,” adding that it will “expose the weakness of a tax net that is already small and would reduce the relative size of the current account surplus, which has been shrinking anyway.”

For Ecobank’s economist, Gaimin Nonyane, the rebasing exercise will result in an increase in the country’s market size, but it is likely to lead to a slower rate of real GDP growth from its current rate of seven per cent in the past five years.”

“Fixed income investors will probably not pay much attention to the GDP dynamics,” said Emerging Market strategist at Standard Bank, Samir Gadio. “The implication is that GDP per capita will subsequently increase making Nigeria a more attractive investment case and potentially boosting consumer stocks,” he said. For the chief executive of Financial Derivatives Company, Birsmack Rewane, the exercise is a move from reality to vanity, that Nigerians will wake up on Monday morning to read that the country’s GDP is the largest in Africa without anything changing positively for them.

“Nigerians will still buy petrol at the same price, they will still have the same amount of money in their pockets, electricity is not going to improve on Monday morning. So the exercise is a journey from reality to vanity,” he said, pointing out that GDP does measure output only and not revenue.

In its latest report titled: “Big Revisions in Nigeria,” Renaissance Capital Limited (RenCap), an investment and financial advisory firm however pointed out that improving the measurement of the GDP does not raise monthly wages nor does it make Nigeria better off in any obvious material way.

But the RenCap report noted: “Under the rebased figures, Nigerians will still have lower per capita GDP ($2,400) than Egypt after three hard years of political instability, and far less than South Africa ($6,800). This will not be easy to explain to the population.

“It could also make life hard for us economists, as we will have to compare a rebased Nigeria with other countries that may not have rebased their data. “The important fact to bear in mind is that GDP is only being recorded better. Rebasing does not mean Nigerians are better off – it just means they are better off than official statistics previously indicated.”

Furthermore, the report stated that the exercise could lead to a downward revision of Nigeria’s growth rate, saying that instead of about seven per cent annual growth over the previous decade, the higher GDP base may reduce growth to closer between five and six per cent.

The rebased DGP numbers are also expected to expose the country’s huge untapped tax base, especially the informal and non- oil sector that are hardly captured. South Africa’s 2009 re-basing exercise, which changed the base year from 2000 to 2005, led to an increase of 2.1 per cent in nominal GDP in the new benchmark.

 

Meanwhile, the All Progressives Congress (APC) has described as an orchestrated distraction and a mindless public relations gimmick the ongoing hullabaloo about the rebasing of Nigeria’s GDP which the masterminds said has seen the country emerge as the largest economy in Africa.

 

In a statement last  Thursday, by its Interim National Publicity Secretary, Alhaji Lai Mohammed, the party said coming after the damning World Bank report which declared Nigeria as one of the countries harbouring the largest population of poor people in the world, there is no doubt that the rebasing noise is the government’s response to the classification

 

”However, the federal government has only succeeded in opening itself to ridicule. This is because if ever there was a clear play at oxymoron, this is it: The largest economy with the largest population of the poor, the largest economy with the largest population of unemployed, the largest economy with the largest population of citizens living in darkness, and the largest economy with the worst infrastructure.

 

”Simply put, there is too much poverty in the midst of plenty, and the so-called economic growth which the FG has been trumpeting with its dubious statistics is not a result of any deliberate government policies. Policies of government are expected to result in reduction in unemployment, increase in capacity utilization by manufacturers, increased access to basic needs of life (food, water, electricity, health care, education, healthy environment, etc), increase in transparency and accountability, etc. On the contrary, the country continues to slip down the ladder on all of these fronts,” it said.

 

APC said the federal government carried its joke too far by even giving the impression that the so-called emergence of the Nigerian economy as the largest in Africa is a function of the economic policies under President Goodluck Jonathan, rather than a rejigging of figures calibrated to fool an unsuspecting public.

 

The party said fortunately, no one has been fooled by the government, even though it has succeeded, at least temporarily, in diverting attention from the pervasive and worsening insecurity in the land, the hopeless power situation that has seen Nigerians publicly protesting being thrown into perpetual darkness, the ticking time bomb of rising unemployment, especially among our youth, the unprecedented massive frittering away and looting of the commonwealth and the total absence of governance.

 

”The reactions of the economic experts and the business community within Nigeria as well as at the World Bank level to the rebasing hubbub have taken the sail out of the government’s wind and dampened its undue ecstasy over what is nothing but window dressing.

 

”For example, the business community has noted that while Nigeria, with the rebased GDP, is now ranked number 26 with regard to the size of the economy in 2013, it is ranked 147 in its ease of Doing Business report of the World Bank, out of the 189 countries profiled. Even Sierra Leone and Liberia had better ranking. In the same vein, our ranking in the UNDP Human Development Index is 153, out of 210 countries. There is no better illustration of the disconnect between growth and development; between growth and quality of investment climate.

 

”Also, the World Bank, in a subtle but clear thumbs down, made it clear that the living standards of the citizenry and the productivity that generates those living standards are the key issues here, and that investors in London, New York, Beijing or Tokyo are not necessarily looking at the GDP statistics but how profitable their investments will be in a country.

 

”Therefore, President Jonathan and his shadow-chasing economic team should therefore quit wallowing in unnecessary chest-beating over the rejigging of figures and the play on statistics and put their shoulders to the wheel to push our nation forward. If they cannot, they should get out of the way and allow those who are capable to do so. Enough of this choreographed distraction,” APC said

Leave a Reply