Rebasing does not solve economic challenges such as inflation, unemployment, and poverty -- it only provides a clearer economic picture.
The implications for policy and investment are also worth mentioning. Foreign investors may be attracted to newly highlighted sectors that were previously underreported. The government may adjust fiscal and monetary policies to better align with the rebased economy. Taxation policies may be reviewed, especially if certain high-growth sectors are found to be under-taxed. Yet, this may affect the potential reclassification of Nigeria's economic status.
In the last few days, especially after the National Bureau of Statistics (NBS) released its figures on the rebased CPI, which indicated a reduction in inflation figures from 32.5 per cent in December 2024 to 24.5 per cent in 25 January, experts have reasonably predicted a considerable difference in the rebased GDP figures when it is released. The last rebasing was done in 2014, using 2010 as the base year of 2010. Between 2010 and 2019, a period of about nine years, the structure of the Nigerian economy must have changed in a significant way, quite understandably.
Generally speaking, GDP rebasing would mean updating the base year used to calculate the Gross Domestic Product (GDP) to reflect current economic realities. When Nigeria last rebased its economy in 2014, updating the base year from 1990 to 2010, it led to a significant increase in the reported GDP. It is reasonable to assume, therefore, that as Nigeria undertakes another rebasing exercise, there are few things to expect.
First of all, in terms of the GDP size, the economy may appear larger than previously reported due to the inclusion of new and fast-growing sectors like fintech, e-commerce, entertainment, and digital services. This does not necessarily mean increased economic prosperity but it provides a more accurate picture of Nigeria's economy.
There will also be a sectoral shifts in economic contribution. Technology, telecommunications, and entertainment (e.g., Nollywood, digital startups) will have a greater share of the GDP. Agriculture, alongside oil and gas, may have a reduced percentage contribution as newer sectors gain prominence. Informal sector activities, which are often underestimated, may be better captured.
Changes in economic indicators are also likely to happen. For example, the debt-to-GDP ratio may improve, making it seem like Nigeria has more fiscal space to borrow, although debt servicing costs remain a key concern. Similarly, per capita income may increase, though this won't necessarily mean improved living standards if inflation remains high.
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The implications for policy and investment are also worth mentioning. Foreign investors may be attracted to newly highlighted sectors that were previously underreported. The government may adjust fiscal and monetary policies to better align with the rebased economy. Taxation policies may be reviewed, especially if certain high-growth sectors are found to be under-taxed. Yet, this may affect the potential reclassification of Nigeria's economic status. For example, depending on the new GDP size, Nigeria may be classified differently in global economic rankings.
If the GDP grows significantly, Nigeria may move closer to upper-middle-income status, affecting eligibility for concessional loans and development aid.
In all these, however, there are challenges to consider: One, rebasing does not solve economic challenges such as inflation, unemployment, and poverty -- it only provides a clearer economic picture. Secondly, if not properly communicated, it may lead to public misunderstanding, with people expecting instant economic benefits.
Rebasing, therefore, will provide a more accurate reflection of Nigeria's economy, likely revealing a larger GDP size and shifts in sectoral contributions. However, the real impact depends on how policymakers use the new data to drive economic reforms, improve employment, and tackle inflation.
Ayo Olodo is public commentator based in Abuja.
