Clearly, Feyi Fawehinmi did not get the APC mail on the rebasing drama.
Read up on other issues at http://aguntasolo.com.
http://republica.ng/2014/04/10-questions-about-nigerias-gdp-rebasing-you-always-wanted-to-ask/#.U0vEF8ZbylJ
10 Questions About Nigeria's GDP Rebasing You Always Wanted to Ask
1. What is the GDP and what does it mean?
GDP is Gross Domestic Product.
In simple terms it is the sum total of all the economic activity in a country in a given period, usually a year. So if you take your clothes to a dry cleaner, it will show up in the GDP figures. But if you wash the clothes yourself, it won't be part of GDP even though both activities achieve the same outcome. Hence the reference to 'economic activity'.
In simple terms it is the sum total of all the economic activity in a country in a given period, usually a year. So if you take your clothes to a dry cleaner, it will show up in the GDP figures. But if you wash the clothes yourself, it won't be part of GDP even though both activities achieve the same outcome. Hence the reference to 'economic activity'.
2. How is it calculated?
It is usually calculated by a survey of businesses. NBS has now expanded the number of businesses it surveys to 850,000 covering all the various sectors of the economy they are measuring. Every quarter, these businesses will report their sales, expenses and whatever else the NBS asks them to report. All these numbers will then be collated and we get a GDP figure. The obvious issue here is that any business outside of those 850,000 businesses will not be captured in the numbers.
3. I've heard it said that "GDP is a flow, not a stock". English please.
…in a really simplistic way, the GDP figure is like Nigeria's annual salary
Yes, that's correct – a GDP is a flow not a stock. This is why comparing someone's wealth to a country's GDP is always a bad idea. Like saying Aliko is worth x percent of Nigeria's GDP. If you earn N10m per annum, that doesn't mean you are worth N10m. You might own property somewhere or have lots of debt. So in a really simplistic way, the GDP figure is like Nigeria's annual salary i.e the flow. What is Nigeria worth? That is hard to determine but you have to think of all the oil in the ground, the human capital etc. If you are able to calculate that worth, then that is a stock.
4. What's all this rebasing business?
Rebasing is basically changing the way GDP is measured. Now we have 850,000 businesses in the data covering everything from telecoms to Nollywood to oil & gas. But in 1990, when the last 'rebasing' was done, we didn't have a lot of those industries at all. The businesses in the previous data were less than 85,000. This means anything that happened outside of that data set was not properly captured.
Between now and 2016 when the next one will be done, there might a whole lot of tech startups that are not being surveyed now. They will then have to be included in the data.
This is why rebasing should be done every 5 years at least. Between now and 2016 when the next one will be done, there might a whole lot of tech startups that are not being surveyed now. They will then have to be included in the data. There might also be some businesses that cease to exist in the form they were being measured. For example, right now the data might be measuring Nollywood businesses that sell VCDs. But what if broadband becomes mainstream to the point where no one buys VCDs anymore? The data might make it look like Nigerians are no longer watching films when in reality, they have simply switched how they watch it. In such a situation, it might make sense to remove VCD sellers from the companies being surveyed and add someone like iRokoTV.
5. So if we're supposed to do it every 5 years, why did it take us so long to do it?
The simple answer to this is anyhowness. Many countries (mostly African) leave their rebasing for so long mainly due to lack of capacity. But 24 years is totally inexcusable. Some people say Obasanjo's government delayed it because we were negotiating debt relief. If we rebased back then and came out with a really big GDP, our creditors might not have been so amenable to writing off our debts.
Whatever the reasons though, it cannot be allowed to happen again.
6. So if our GDP is so high, why am I so broke?
The reason is because the new GDP simply measures what you have been doing all along. It's not your fault that the NBS has not been capturing what you have been doing. For example, many people now earn their living from recharge cards one way or the other. The GDP data has now acknowledged that they exist but nothing has changed in what they do or how they sell their recharge cards.
7. The APC says the rebasing is a PR gimmick by the government. Are they right?
No. APC's position on this makes no sense. The GDP rebasing had to be done, no question about it. That we have had all sorts of things going on in the economy that has not been measured was an untenable state of affairs. And because we waited 24 years for the revision, the change was guaranteed to be massive.
Nothing to see here.
8.South Africans seem really mad, what gives?
Their irritation is perhaps understandable. First of all, rebasing is hardly the way economies overtake each other. A couple of years, Brazil briefly overtook the UK as the world's 6th largest economy but they did it the straightforward/old fashioned – by growth. Secondly, no one expected such a huge figure for Nigeria. The general consensus was around $460bn. Even though that would still have given us a big distance to South Africa, right now, the gap is so wide that it is impossible for South Africa to catch us by growth again. And given that South Africa rebases regularly (they have one due later this year), they cannot use the rebasing option to catch us either.
GDP will only tell you what you ask it to tell you
Having said all that, any reasonable person has known for a while that the Nigerian economy was significantly bigger than the South African one. So it was only a matter of time before the reality hit home. I guess even knowing in advance doesn't make it hurt less when it actually happens.
9. I heard somewhere that the calculation is faulty, is it true?
GDP measurement will never be an exact science. Anything outside of what is surveyed will not appear in the numbers. So it will always be a best guess. And it is constantly being fine tuned to take account of changing patterns in economic activity.
Europe is now going to start including drug trafficking and prostitution in its GDP estimations
In Europe for example, the EU has directed countries to start estimating illegal industries like drug trafficking and prostitution and including them in GDP. Based on this new directive, around £10bn will be added to the UK's GDP this year (£3bn for prostitution and £7bn for drug trafficking). Given the UK's GDP is around £1.6trn, this is a small change but it highlights the fact that GDP will only tell you what you ask it to tell you.
NBS used motorcycles and speed boats to get to remote parts of the country when it was recalculating the numbers. The new numbers are a best guess. Calling them faulty will be unfair.
10. So what now?
One of the best things the new GDP tells us (and the world) is that we are not all about oil and gas. In fact, oil is now worth less as a share of the economy than was previously thought according to NBS. In a way, this makes sense – we have always known that the oil industry employs very few people and benefits a tiny minority.
More than half of economic activity is now in services – hotels, taxis etc.We can say we have skipped the manufacturing phase of our growth (manufacturing has never had a dominant share of the economy in our history) and moved to this new service economy, just like India. Ultimately this is the path that all economies follow – first agriculture, then they start making things and when they get rich they start selling services. China's economy is now 50% services as well but it has taken them 30 years of making stuff to get there.
This is a bitter sweet story about the rebasing exercise. On one hand, it is a really good thing for people to look at us and see that there is more to us than oil. On the other hand its somewhat sad that we never really got to make things and create those skilled jobs that come with manufacturing.
But the biggest task left now is how to unlock all that value that is supposedly hiding in the economy.
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We face forward,...we face neither East or West: we face forward.......Kwame Nkrumah
We face forward,...we face neither East or West: we face forward.......Kwame Nkrumah
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