Nigeria rebasing enriches an elite
ON April 6 this year, about 61% of Nigerians were surviving on $1 (R10.50) a day. On April 7, the Nigerian economy was revalued to reflect present-day economic realities.
On April 8, as a result of this so-called rebasing, the Nigerian economy — as measured by GDP — was estimated to be worth $510-billion. That’s almost twice the $264-billion it had been valued at two days earlier. This boosted GDP per capita to $3 000, which is equivalent to just more than $8 a day for all 170 million Nigerians.
That’s what the economists told us.
But it’s safe to assume that the roughly 104 million Nigerians who had been living on $1 a day on April 6 did not suddenly find themselves immensely richer on April 8. Instead, what has probably happened is that since 2000 — when Nigeria should have done the rebasing exercise — a comparatively small group of individuals have managed to become exceedingly wealthy as a result of previously untracked activity in the cellphone and movie industries.
This group could be added to the comparatively small group of Nigerians who have become exceedingly wealthy as a result of the country’s oil assets and makes up a still comparatively small group of exceedingly wealthy Nigerian citizens.
Of course, although this group may be comparatively small in the context of the total Nigerian population, recall that Shoprite’s Whitey Basson said his seven Nigerian stores sold more champagne than all Shoprite’s liquor stores in South Africa.
So, although some South Africans might have felt a little peeved at being relegated to the distant number two position (with a meagre $384-billion GDP), the good news might be that South Africa no longer has to carry the awful burden of having the worst Gini coefficient in Africa.
Ahead of the rebasing exercise, Nigeria’s Gini co-efficient, which measures income distribution along a scale from extremely inequitable to equitable, was 49, according to Nigerian statistics. This compared with South Africa’s Gini coefficient in the low 60s. It’s hard not to imagine that one result of the extra $264-billion will be to push Nigeria’s Gini coefficient into the high 60s.
And then there’s the matter of tax. The almost doubling in the size of the economy has not brought an increase in the government’s tax take. In 2013, Nigeria’s tax take, desperately needed to fund infrastructure, was about 8% of GDP. That 8% is set to shrink to about 4% of the enlarged GDP figure. The comparable figure for South Africa is about 28%.
A low tax take and a high Gini coefficient might attract tax dodgers, but in theory it is not the sort of combination that attracts long-term investors, given the implications for social stability. However, as Shoprite, SAB Miller, MTN and many other foreign investors are proving, the reality is different for the fleet-footed.
What the rebasing exercise — which was apparently delayed to improve Nigeria’s efforts in 2005 at persuading the Paris Club and multilateral lenders to provide debt relief to a poor country — really highlights is that we are poorly served by economists and their data. The size of the South African and Nigerian economies and income distribution in them have not changed from what they were three weeks ago. (Of course, the fault does not lie with the economists; it lies with us who use their data and analysis.)
Is it really accurate to say that Nigeria is wealthier today than it was 20 years ago? Much of its oil resources have since been depleted amid shocking environmental degradation and without countervailing benefits such as infrastructure and education for more than a handful of people.
It is the same misdirected economic thinking that measures the South African mining industry by the tonnage mined and pays no heed to the environmental and community destruction wreaked in the process.