by Chuba Ezekwesili
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?
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.
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 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 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.
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.
– This Best Outside Opinion was written by Chuba Ezekwesili/Naijanomics