11 December 2012

Nigeria: FG Misses 2012 Target On GDP Adjustment

Nigeria would have to wait much longer to start enjoying the benefits of a bigger Gross Domestic Product (GDP) as the 2012 target set by the Federal Government to change the base year for the GDP computation may no longer be realised.

The National Bureau of Statistics (NBS) had last year announced plans to change the base year for the country's GDP computation to 2008 from 1990.

The target date for announcement of the rebased GDP figures was shifted twice from the first quarter to second quarter, 2012, before it was finally fixed for the third quarter (September 6, 2012), a target that government also failed to realise.

However, with less than three weeks to the end of the year, the 2012 target seems less likely to be realised.

A close source at the National Bureau of Statistics (NBS) who spoke to LEADERSHIP on condition of anonymity, confirmed the unlikelihood of announcing the rebased GDP before the end of this year.

According to the source, the NBS was not working alone to achieve this and so coordinating the other agencies of government to work at their own pace have been very challenging.

"The NBS is not working alone on this project, there are other government agencies involved and we need to work closely with them. That has delayed the process", he said adding that financial issues have also been a challenge.

The GDP rebasing, the Statistician-General of the Federation, Dr. Yemi Kale, had said may raise the country's GDP to $247 billion almost as big as South Africa, the continent's top economy, with a GDP of $422 billion.

"There have been a lot of changes in the Nigerian economy, for example, we now have a telecom sector which did not exist in the 90s," Kale had added.

Kale, had said that the policy would lead to a 'huge jump' in the estimated size of the country's GDP, which would better reflect the structure of the economy.

GDP is the total market value of all final goods and services produced in a country in a given year. Reports had shown that Nigeria's nominal GDP for the third quarter of 2012, was estimated at N10.9 trillion.

Most governments overhaul GDP calculations every few years to reflect changes in output and consumption, such as mobile phones and internet usage, but Nigeria has not done so since 1990 suggesting that the previous GDP framework underestimated economic activity.

When Ghana's GDP was rebased in 2010, the size of its economy was found to be 60 per cent bigger than previously recorded - $31 billion, compared with $18 billion.

The new GDP figure would enable Nigeria join the ranks of middle-income countries and put the size of its economy much closer to that of South Africa.

The effect of the expected rebasing on Nigeria's macro-economic ratios would however be mixed.

A bigger GDP would mask the impact of a higher budget oil price on the budget deficit/GDP ratio. The 2012 budget oil price is based on a benchmark of $72/barrel.

The upward adjustment to GDP will allow the government achieve its medium-term objective of narrowing the federal budget deficit to 1.1 per cent of GDP in 2015. This is because as the numerator (which is the GDP), increases, the deficit expressed as a percentage of GDP, diminishes.

A bigger GDP also implies an upward revision in per-capita income. Nigeria's current per-capita income is estimated at $1,600, which still trails that of many other economies on the African continent.

For example, Nigeria's population is three times bigger than that of South Africa's and after its GDP adjustment Nigeria's revised GDP per capita will still be smaller than that of South Africa.

Nigeria's GDP per capita is expected to increase from $1,600 to 2,600, if GDP is revised by 60 percent in 2012. This compares with $8,700 per capita for South Africa, which is the IMF's projection for 2012.

Nigeria's public debt to GDP ratio stands at 17.3 per cent as of the end of 2011, according to data from the Debt Management Office (DMO). This debt to GDP ratio, which is already lower than that of most sub-Sahara African (SSA) countries, is expected to drop to 10.5-14.5 percent of GDP, depending on the extent of the upward revision.

This implies that the government will have more capacity to borrow and is likely to be more inclined to do so and thus sustain the deficit for a few more years due to the favourable debt ratio.

Analysts say given Nigeria's large infrastructure deficit, this may not be viewed as a negative for the country's fiscal outlook, provided any such new government borrowing would be used to improve infrastructure and other capital projects to expand economic activity.

Copyright © 2012 Leadership. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.