Nigeria’s Nationwide Bureau of Statistics (NBS) is planning to rebase the nation’s GDP and Client Worth Index (CPI). This course of includes updating the bottom yr used for calculating financial metrics to mirror adjustments within the economic system. The present base yr for GDP is 2010, whereas the CPI base yr is 2009.
Ever because the announcement final week, there was loads of commentary on social media about it. Some individuals have expressed apprehension that the NBS will use the chance to “magically” convey inflation down from its present degree of round 35% to fifteen%. Provided that Nigeria is a low-trust society and provided that meals costs have actually doubled over the past yr regardless of meals inflation formally being 40%, these fears might be seen as legitimate.
Nonetheless, such a concern doesn’t take into account a phenomenon often called “base impact”. The bottom impact happens when a brand new place to begin is launched right into a calculation. This variation can have a big impression on values that rely on this place to begin. In financial phrases, when a brand new base yr is launched, it alters how we see financial tendencies. A change in base yr could make financial progress seem stronger or weaker than it truly is. Probably the most apparent factors the place the bottom impact is seen is inflation.
So, for instance, within the 5 years that Sani Abacha sat in Aso Rock, inflation averaged 57.17%, 57.03%, 72.84%, 29.27% and eight.53%. Did Abacha immediately begin working miracles in 1996 and 1997? No, he didn’t. The price of a tin of Peak Milk, the evaporated selection (I keep in mind this one as a result of my Uncle was advertising and marketing supervisor at Wamco on the time), was ₦10 on the finish of 1994; by the top of 1995, it was ₦15, and my Mum moved to Cowbell, a lot to her brother’s annoyance, when it hit ₦20 in 1996. Then, Wamco, the maker of Peak Milk, discovered from Cowbell and launched sachet milk. By 1999, once I moved to my Uncle’s home in Lagos, the worth of the tinned selection had held at ₦25 from 1997. So it’s not that there was no inflation; it’s simply that the speed of value change was not as sharp as earlier than. Once more, 57.17%, 57.03%, 72.84%, 29.27% and eight.53%.
Rebasing is a normal follow that ought to assist us take away the tinted spectacles of the bottom impact. It must happen each 5 years, in response to world greatest practices. The purpose is to seize adjustments within the economic system, similar to the expansion of the digital sector, and supply a extra correct image of the economic system’s measurement and composition. Nonetheless, there are considerations that the NBS would possibly use what must be a real and regular train to control the numbers to current a extra beneficial image of the economic system. These considerations are legitimate, given the federal government’s historical past of taking part in quick and free with financial knowledge, similar to unemployment charges, the place our official definition of an employed individual is an implausible one hour of labor per week!
If finished proper, the rebasing course of may doubtlessly result in a rise within the general measurement of Nigeria’s economic system, as beforehand underrepresented sectors are higher captured. Do not forget that the final rebasing train was a decade and a half in the past, and there are actions we do now that weren’t captured again in 2010. Suppose, for instance, FinTech and that complete swathe of the digital economic system. We have to convey these in. Nonetheless, the stories which have dominated social media concerning the NBS saying they’d embody unlawful actions into the calculation increase considerations concerning the political crucial to current a strong economic system slightly than an correct reflection of the financial actuality, and that is the place not doing the fitting factor on the proper time, due to politics, turns into an albatross.
There is no such thing as a doubt that the NBS, within the decade beneath the stewardship of Dr Yemi Kale, adhered to world greatest practices and carried out its crucial however underappreciated function of telling Nigeria’s political rulers the sort of truths they might not need to hear. Due to this, the NBS was routinely denied the funds that it wanted to function. Does anybody keep in mind the ugly spectacle of President Buhari’s spokesman, Garba Shehu, attacking Dr Kale as a result of the unemployment knowledge in This autumn 2017 uncovered that the 12 million jobs he claimed that the federal government created have been phantom jobs? Following that, the NBS didn’t see cash to do one other unemployment survey, and by the top of 2018, Dr Kale was tweeting brazenly concerning the lack of funds to do the unemployment survey…
It’s an identical online game with the rebasing and with just about so many different issues we do. Our fireplace brigade strategy to most issues signifies that when it’s time to do the fitting factor, it turns into painful. Growing petrol costs yearly consistent with inflation would have made the removing of the petrol subsidy much less painful. Letting the naira commerce freely when oil costs have been very excessive, and we had the buffer of an Extra Crude Account would have made the lack of worth simpler to handle. An incremental rebasing each 5 years would get rid of distrust.
If you don’t do issues on the proper time, you create a lacuna, which turns into a canyon when somebody tries to fill it. The construction of Nigeria’s economic system has modified within the 15 years since we final rebased it. We have to rebase. To handle considerations across the rebasing course of, there’s a want for end-to-end transparency. Organisations just like the World Financial institution and the Worldwide Financial Fund (IMF) need to be concerned in monitoring the method to make sure that it follows worldwide greatest practices.
Nwanze is founding father of SBM Intelligence
