The Bricklayer’s Explanation to the Nigeria’s GDP Rebase


If you’re reading this, then it means by some special power of tolerance, you’re not yet sick and tired of hearing about Nigeria’s rebasing. Kudos to you all. There’s been a lot of questions on what rebasing is and what it does for Nigeria. So here’s a simple – and perhaps condescending – explanation of what it is. I’ll skip most of the economic jargons and numbers and get to the implications.

Rebasing is carried out so that a nation’s GDP statistics give the most up-to-date picture of an economy as possible. It’s important because the GDP figure is a key determinant in estimating how much a country can afford to consume and how much it produces. Last time we did a rebase was 1990 and we all know Nigeria has certainly changed since then. Nigerian GDP now includes previously uncounted industries like telecoms, information technology, music, online sales, airlines, and film production, so Nigeria’s 2013 GDP is at $510 billion compared to the previous estimate of $264 billion. This figure now accounts for the ‘enlightening’ Nollywood movies you watch, the MTN credit you purchase and the horrid Arik flight you took. So what exactly does it change?

 

What Changes

Bragging Rights

The most obvious change is that we’ve surpassed South Africa to become Africa’s largest economy. So of course, trust Nigerians to brag about it. And of course, given that some chaps in the Nigerian government ‘no dey take last’, they’ve chucked this astronomical rise in GDP to the administration’s transformation agenda. Given that it directly changes nothing for the average Nigerian, they could be more right about how it correlates with the transformation agenda than they realize.

 

Lower Debt to GDP Ratio

If a man now has more money in the bank compared to the amount he’s borrowed (Not actual money though: just money on paper), he has the freedom to borrow more money.  In Nigeria’s case, it should means the country can borrow more money to improve infrastructure. But then, is that what the money actually gets used for? Worse still, the temptation to borrow more and squander it might ironically take us back to the days where we had to pay our debts first rather than build schools, hospitals and roads. The good news is Dr Okonjo-Iweala said that the country won’t change its debt policy and borrow more. Let’s hope so.

 

Investor Confidence

Now that we’re the largest in Africa, perhaps investors will say “Ohhh! Nigeria’s large economy makes it a lovely place for greater returns on our investments”, so they’ll invest more. Well, they put more into investment decisions than that, but you get the point. If you don’t, then imagine that Nigeria is a man with a new set of nice clothes. Perhaps Nigeria now look more attractive and has a better chance of getting the ladies’ attention.

 

Foreign Financial Support 

Nigeria will lose access to a number of aid and fundings from international organizations, given that we’re now a ‘richer country’. So our funding might go to poorer countries that are seen to need it more than we do. For example, if people had the choice of giving charity to Dangote or giving it to me, they’d choose me, right? The worrisome thing in this case is that Nigeria is just me dressed as Dangote…without his money of course.

 

What Doesn’t Change

So here’s the more relevant news: none of the macroeconomic metrics that affects the average Nigerian man,woman or child changes. In Nigeria’s case, that sucks, cause we’re slacking on a number of the main economic issues that affects the masses.

 

Inflation Rate

Inflation is the sustained increase in general market prices of goods and services in a country over a period of time, usually a year. The amount of money in the economy affects this rate. Given that rebasing doesn’t add one kobo to the economy, the amount you paid for pure water doesn’t change today…neither did the amount of money I paid to jump a cramped sweaty Lagos bus to work today.

 

Unemployment Rate

Unemployment doesn’t need a definition. We see it everyday in Nigeria. So if you didn’t have a job yesterday, you still don’t have one today. It’s that simple. Well, except you have an interview and get an offer today.

 

Infrastructural Deficit

Rebasing does not improve Nigeria’s infrastructural failures. Despite the rebasing, I slept sweating and I woke up sweating thanks to the lack of power. We’re still behind in terms of power generation with only 4,000mw, while South Africa has about 40,000mw. In terms of roads, hospitals, schools and other infrastructural necessities, we’ve simply got a long way to go.

 

Your Bank Account

Check your bank account or check your wallet. Did you money double? Most likely not. So rebasing Nigeria’s GDP didn’t put money in anyone’s pocket. You might as well add another zero to the back of the figure on your bank statement. It still won’t increase the money in your account.

Some other things don’t change too, but it’ll be extraneous getting into these. So overall, the best way to understand the effect of Nigeria’s GDP rebasing is that nothing changes, but something changes. $20 billion is still missing and millions of unemployed Nigeria youths are still roaming the streets. Yes, you and I don’t get jack from the GDP rebase, but it assists policymakers in formulating more accurate decisions.  On the bright side, my ‘agege’ bread still costs N100. Let’s hope that never rebases.

 

 

  • nosikenwigene

    Reblogged this on i2sabi.com and commented:
    This was a great read and thought you guys should see it too

  • Alabi Mobolaji

    Nigeria has considerably never had harsh NATURAL economic and challenges. Personally, i believe the whole rebasing could have positive ripple effect. But as was rightfully pointed out, “But then, is that what the money actually gets used for?”. On a lighter note, the explanation you have provided are basic, unambiguous, and well thought of.

  • I think rebasing is right on point cos it has actually block the way for those who use our plight to earn donations from international organizations in the name of foreign aid and never use it for the purpose. Now they have to think of something else because the international communities are now wiser. now Nigeria has no excuse of not being self sufficient and even cater for other African countries who are really in need of these aids, given the result of rebasing our GDP. They knew We are matured and rich enough to cater for ourself and others.
    Thank you IMF, World Bank etc.

  • godgee

    I’d always known its a cosmetic approach to a deeper economic problem. This administration is only desparately trying to score a cheap economic point. Anything short of a convincing explanation as to the whereabout of our #20billion Dollars wll never get US distracted from the fact that our leaders have failed woefully in their duties. GEJ should stop trying to score political point and get to work on real issues and not this fallacies!

  • Pingback: Chuba Ezekwesili: The bricklayer's guide to understanding Nigeria's GDP rebase - The ScoopNG - The ScoopNG()

  • Two things:
    1- I am tired of explaining to people- inclusive of supposed economists, and finance gurus -the clear distinction between ‘economic growth’ and ‘economic development’ . So, thank you for placing that side-by-side this nagging politically hijacked issue of rebasing. Hopefully we can move unto discoursing much more relevant issues. We all know growth isn’t necessarily our problem – a string this present government hasn’t failed to pluck for the confusion of uninformed persons.

    2- Looking at the power generation capacity of both South Africa and Nigeria as stated above, relative to population statistics and resource endowment, is downright depressing.

    Thanks for this piece.

  • Ashama

    It’s painful to see some so called intelligent people celebrating this rebasing as though it improves our standard of living.
    Good piece though. Very easy to understand.

  • Charles Aninweze

    Congratulation! This is a very great fit for our great country, Nigeria. But ironically, Mr President, most Nigerians still live in abject poverty. I agree with you that we should not celebrate until most Nigerians can feel the positive impact of our GDP growth. The growth makes no sense to me, where our Per Capita income of USD 1700 as at 2013, an equivalent of N289,000 is a far-fetched income even amongst the employed graduates and professionals.
    Mr President, the unemployed youth’s per capita income equals zero naira. Corruption has eroded our collective wealth. The privileged few around you, in your cabinet, immerse so much that they have left the less privileged ones with nothing but abject poverty. There is gross income inequality and massive unemployment amongst the youth. Many are financially deprived.
    Mr President, your good-will is felt in our hearts, but it is yet to touch our lives. Recently, my confidence in your ability to change the status quo has started waning. I was amazed when the World Bank ranked us as one of the poorest countries in the world. However, one of your aides tried to correct this assertion by clarifying that two-third of the world’s extremely poor are concentrated in five countries, which includes Nigeria.
    Mr President, the middle class grew by 28% under your watch. (World Bank, 2013) This is a good record. However, the lower class and the un-employed are not in this bracket. The ability to raise an army of youths who are gainfully employed and whose per capita income truly reflects the recent figures in the rebased GDP will make you a great hero.
    Dr Charles Aninweze’s reply to Mr President on his comments on facebook as regards rebasing of GDP.

  • Tolu Atanda

    There is actually nothing wrong with rebasing, its been long overdue. However, the president’s ‘Economic growth’ team should not make us believe that growth and development are the same.

  • Great work. Thank u sir for enlightening us.

  • I love your simplified economic analysis, whats the secret? Reflection while bus hopping? LoL.

    Seriously Chuba, this so-called ‘Nigerian spirit’ is the opium that keeps our collective tolerance levels high.
    Ofcourse the recent GDP rebase is both political & defensive; score int’l points for OGA (like Ministry of Agric) and counter the world bank’s listing of Nigeria as one of the poorest countries(other negative pronouncements too) , timely eh?
    The brass hats would simply shrug & look to other donor agencies to augument the deficit that would come as a result of being “26th largest economy in the world”.
    I can imagine foreign investors d reply to being wooed with our new GDP status with a dead pan expression; “Nothing has changed”.

  • Anonymous

    agege bread in abuja seriously….where???????. Really couldn’t care less about the FG and this economy,but as usual a very good write up.keep it up bro

  • Ogunfuwa Onyemaechi Kolawole

    How I wish, I can av d opportunity 2 stand b4
    GEJ n make him realize. dat Nigerian’s neva
    voted 4 PDP during is 1st tenor. They voted 4
    GEJ. Believing he is young, vibrant, close to d masses n
    will giv d masses a listening ear. But u av actually
    fail d gud people of Nigeria. You are proving to
    yourself, nt competent enough for that
    position. The areas u left untouched are
    extremely more than the areas you touched.
    Your house is on fire n u are busy celebrating outside. Your hand work shud b d one talking on your behalf. if u av actually worked. U are
    doing d wright thing at d wrong time.
    Can u be proud enough to tell d masses, how u av affected there live positively?
    Why is dangote alone, still having d wright to d importation of rice? when anyone else try t
    o import that same rice, it is called contraband goods.
    U increased fuel price, yet you can’t increase state allocation.
    no employment, power and so many others.

    • Boom shkaklaaa boom boom, problem solved.

  • Emem

    Interesting piece. It just shows that as a country, all we have is movements but no achievements. Well, since the Rebasing doesn’t change the price of garri in the market, I refuse to be bothered about it.

  • Anonymous

    There is only economic growth in nigeria but no development

  • Anonymous

    A really good read.

    • I don’t know who you wrote this for but you helped a brhtoer out.

    • It’s much easier to understand when you put it that way!

  • Dara.

    Insightful.Now I know better.