BUSINESS New GDP: Nigerians say ‘no cause for celebration’
The National Bureau of Statistics on Sunday released Nigeria’s nominal GDP which showed a rise from N54.2 trillion in 2010 to N80.2 trillion in 2013, putting the country ahead of South Africa. The development revealed the new structure of the Nigerian economy and improved the reliability of economic data. While many economists who spoke to Daily Trust described the new index as good, some see it as just a mere ego inflation as the new profile does not reflect the true position of what the common people are going through in the economy.
For Rep Ibrahim El-Sudi the new GDP is mysterious and a mere paper work.
He said the latest GDP figures were only indicative of Nigeria’s fulfillment of the World Bank and International Monitory Fund (IMF) requirements, which translate in the pronouncement, without corresponding improvement on the lives of Nigerians.
Rep El-Sudi stated this yesterday in Abuja, stressing that it defied understanding for some to reel out figures of economic improvement when Nigerians are practically suffering in all the nooks and crannies of the country.
El-Sudi, who is a member of the House committee on power, also faulted the recent privatisation of the power generating companies in the country, saying the hasty way in which the privatisation was undertaken would not augur well for the country’s power industry.
The President, Lagos Chamber of Commerce and industry, Remi Bello, welcomed the rebasing of the Gross Domestic Product (GDP) saying that the development revealed the new structure of the Nigerian economy and improved the reliability of economic data.
Bello, however said there is need for caution in celebrating these positives figures, because of the weak revenue base of government. The lower ratio should not be allowed to encourage increasing deficit spending or increased borrowing.
The LCCI boss said they are also concerned that while the nation’s current global ranking on basis of GDP is 26th, the ranking in Global Competitiveness Index is 120 out of 148 countries profiled, and the ranking in Human Development Index is 153 out of 210 countries.
This underpins the need to address the issues of investment climate as well as issues of welfare of the citizens. Only then will the country’s performance in GDP be appreciated by the business community and the generality of the citizenry.
Bismark Riwane, CEO of Financial Derivative Limited, said the purpose of rebasing is to have data integrity and accuracy which makes it a better companion.
“What is important is that your economy has 2.5 per cent of the world population but you are producing 0.81 per cent of the world output, your potential GDP is growing at 11 per cent while your rear GDP is growing at 7 per cent. One thing needs to be clear, GDP is an output measure not revenue measure, what we have measured is an output in a year and brought it back to the value of rebasing, rebasing is what we should do for five years but we don’t do it for 20 years, basically what we are doing now is catch-up.”
An economist, Henry Boyo, described the rebasing as a development that is “good for the ego”, insisting that the standard of living of an average Nigerian is lower than that of a South African.
However, Boyo explained that nominal indications that Nigeria’s economy was greater than that of South Africa in terms of output would amount to nothing if Nigerians cannot boast of a better life.
“I do not celebrate any increase in that index. As long as you cannot compare the performance of your economy and as far as critical indices of your economy do not reflect that of successful economies elsewhere, you are a failure.
“Inflation rate is never more than 1.5 or 2.0 per cent in successful economies. When it goes above 2.0 per cent you are in crisis. Unemployment never reaches the height of 23 per cent or more.
“An optical comparison of the social welfare, level of investments, level of infrastructure that is currently in South Africa, will make you question the validity of the claim that we are ‘better off than south Africa’.
“Yes we may be bigger, like a giant, but we certainly are not very effective in the utilisation and management of the resources that are at our disposal,” Boyo said.
“There is no reason to have $4 billion in reserve and you have four months imports’ cover. And at a period we had these indices in 1996, we had an exchange rate of N80 to $1.
“And about two years ago we had $60 billion reserve and between 16 and 20 months imports’ cover. When you have an extended import cover, you are not supposed to have an exchange rate of about N160 to $1, double of what we had in 1996. It is not commensurate.
“It is a result of a deliberate manipulation of the exchange rate of the naira.
“It is inappropriate to have an exchange rate of N160 when we have an extended import cover. It means that the more that you earn the poorer you become,” the economist said.
He also blamed the poor standard of living in Nigeria on the structure of the economy, saying that “even if GDP triples with the same structure in place, there will not be real impact.
Also, Daniel Ashiekaa, an economist said the GDP reflects the size and diversity of the economy. “It’s like putting a price tag on our economy, i.e. saying this is how much our economy is worth and these are the sectors that have given us that worth. You will agree that as of 1990, sectors like telecoms, ICT, financial services (there were fewer banks and not as buoyant as today), Nollywood, etc were either not there or not as valuable as today.”
On the macro level (i.e. for Nigeria as a country), he said, the new position of the country has impact on our credit rating, international competitiveness, attraction to foreign investors and more favourable borrowing terms.
On the micro level (i.e. at the level of the individual), Ashiekaa noted that the benefits are more far fetched or long term. “It does not immediately increase money in your bank or give you light. Meaning, though the Nigerian economy has been gaining traction (as reflected in the higher GDP,) more work needs to be done by the government to address the structural imbalances in the economy before the benefits of a higher GDP can trickle down to the common man.”
“One area is infrastructure (your generator for example) which is a key driver of economic growth. We need to address the energy sector (power, oil and gas), social infrastructure (schools, hospitals, etc), roads, etc - all the things we complain about everyday. If we don’t do these, the growth in GDP will only be statistical!
“Good news though is that with all of what we complain about, Nigeria (on a macro level) has been recording an annual growth rate of over 7%.
our notorious power shortages present a massive commercial opportunity and I predict that the power sector growth will be more exponential than telecoms,” he said
Also, commentators like Obademi Franklin said the figure does not add up, adding that the level of poverty in the country is too high. “The World Bank still said we are very poor. So, been the first in Africa and we are not impacting on ordinary Nigerian like me is nothing to celebrate. I am a graduate of Urban and Regional Planning and I did my youth service in 2010 but up till now no reasonable work. I am only surviving on the petty job I am doing.”
Franklin said until government is able to deal with unemployment and generate jobs for the people, “we are not yet the largest economy. Putting it on paper and celebrating it will not help will us, let us be practical about it.”
Ichemba William in reaction said the result of the GDP is not a surprise. He explained that the problem of this country is mismanagement of fund and leadership.
“If we do what we are supposed to do well, we can still come up even in the world GDP rating. It is a welcome development,” he said.
Mrs. Grace Adebola, a trader, said she was shocked to “hear this morning all over the news that Nigeria is now number one in Africa.”
According to her, “with the tough situation of things in the country: market is not moving, no money and we are the largest? May be for the big people in the government.”
She said government should find solution to the problem of the common man and help build small business owners, adding that that will help the country to develop fast.
Godwin Obiasemen said, “being the largest does not change anything because we are still battling with basic infrastructures problem, no power supply, water, good roads, schools and most necessities.”
He said: “It is just their own formulation and as it does not translate to the well being of individuals in the country. The government needs to embark on programmes that will affect people’s lives, then, we will have and live positive economic growth.”