The World Bank, yesterday, reacted to the $510 billion Gross Domestic Product, GDP, announced by the Federal Government on Sunday, challenging the government to ensure that the figure translates to better living standards among Nigerians.
"What matters is the per capital and what matters is how well our individuals are doing. I think the rebasing is great, at least we have a good sense of how large that economy is.
"Also, it is the most populous country in the region and it is fantastic we have this done but going forward, what matters and very important to everybody is productivity to generate other indicators," Mr Francisco Ferreira, Chief Economist of the global bank told journalists at a briefing on the Economic Outlook Report on Africa, in Abuja.
The Chief Economist said the World Bank welcomed the new GDP figures and that the organization was optimistic of increased Foreign Direct Investment, FDI, into the Nigerian economy.
He, however, cautioned that mere GDP figures in themselves were not enough to attract foreign investors and that the Federal Government must ensure a conducive environment capable of ensuring high returns on investments.
Ferreira also noted that the fact that the Nigerian economy has overtaken that of South Africa in size was nothing for the latter to worry about.
His words, "I don't think South Africa should worry about the recent development, if they want to worry, they can worry about labour situation, strikes and other issues, those things make South Africa less attractive. The Fact that Nigeria is largest economy is nothing to worry about."
Ms. Punam Chuhan Pole, Team Leader, Africa's Pulse Team disclosed that economic growth in Sub-Saharan Africa, SSA, continued to rise from 4.7 per cent in 2013 to a forecasted 5.2 per cent in 2014. This performance, she said was boosted by rising investment in natural resources and infrastructure, and strong household spending.
GDP not properly rebased-- NACCIMA, LCCI
Meanwhile, the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, NACCIMA and the Lagos Chamber of Commerce and Industry, LCCI, yesterday, hailed the latest size of the Nigerian economy, but said that the GDP was not properly rebased because "60 per cent of transactions in the informal sector of our economy are not captured.
"The economic activities in this country are enormous; how many trailers are on our roads but they are not recorded; calculate the value of the goods they are carrying, it runs into billions of naira, go to the supermarkets, the goods there are worth millions of naira, but how many traders there are paying as taxes. They are not captured; go to ASPAMDA at trade fair or Ladipo auto parts market , all in Lagos, there are thousands of shops and in each shop there are goods worth N10 million, how do you capture it?" said John Isemede, Director General, NACCIMA .
He noted that the country could even attain the 15th largest economy in the world if transactions in the informal sector of the economy are well captured.
In the same vein, Remi Bello, President of LCCI, said the apex chamber welcomes the rebasing of the Gross Domestic Product, GDP recently announced by the National Bureau of Statistics, which led to a review of Nigeria's nominal GDP from $270 billion to $510 billion, but said "There is need for caution in celebrating these positives, because of the weak revenue base of government."
According to him, the development revealed the new structure of the Nigerian economy and improved the reliability of economic data.
"The value of the rebasing lies in the following: New set of data reflecting current configuration of the economy, better economic information for economic and business planning; better information for policy advocacy and engagements, better information on the size of the economy and its various component units."
According to him, the rebased GDP underscores the need to improve on some major fiscal policy measures of the government especially with regards to implications for the following ratios which have recorded sharp declines: Ratio of non oil revenue to GDP, ratio of infrastructure spending to GDP and ratio of capital expenditure to GDP including ratio of private sector credit to GDP as well as ratio of social spending to GDP.
"There is therefore a great deal of work to be done to make the economy stronger by improving on the above ratios. On the positive side, the new GDP would improve on some rations such as: Ratio of fiscal deficit to GDP and ratio of debt to GDP.
"The lower ratio should not be allowed to encourage increasing deficit spending or increased borrowing.
"The LCCI is in agreement with the coordinating Minister that the lower debt to GDP ratio should not be reason to increase borrowing. It is also significant that the rebased GDP has thrown up the very important issue of growing inequality in the Nigerian economy, which has implications for economic and social stability," said the LCCI chief.
No rating impact despite scale of Nigeria's GDP uplift -- Fitch
In its reaction, international rating agency, Fitch said Nigeria's large-scale GDP rebasing has a mixed impact on key sovereign rating metrics, and therefore has no automatic implications for Nigeria's 'BB' /Stable sovereign rating.
"It could, however, boost investors' sentiment and that is likely to support the sovereign credit profile over the longer term. The GDP uplift affects some key rating metrics positively and some negatively. 2013 per capita GDP rises by 89% to USD2,900 on Fitch's calculations. But it remains below both the 'BB' and 'B' category peer group medians of USD4,528 and USD3,841, respectively," it noted.
Continuing, Fitch said, "It is also below similarly rated oil exporters Gabon (USD10,688) and Angola (USD 5,703). Per capita GDP ranking relative to other countries is more important in our sovereign rating methodology than the absolute level."
Nigeria overtakes just three Fitch-rated sovereigns: Vietnam (B+), Philippines (BBB) and Bolivia (BB ) following the uplift. The other main positive impact is on public debt indicators, which are already a rating strength and now look even stronger. 2013 debt to GDP drops to 11.6% from 22% and the average deficit to GDP ratio is just 1.4% over the past three years (both calculated on a general government basis).
However, Nigeria's low non-oil fiscal revenue now looks even lower at just 3.8% of GDP (2013 Fitch estimate). The GDP uplift puts some other key metrics in a poorer light. The 2013 current account surplus shrinks to 4.1% of GDP (and is likely to be overstated given the large errors and omissions in the balance of payments).
Foreign direct investment drops to less than 1% of GDP, among the lowest in the region. Broad money a proxy for financial market development and banking sector penetration also declines, from one third of GDP to less than one fifth of GDP.