Would GDP rebasing make any meaningful impact on real income?, By Isiaq Ajibola

On the entire, the deliberate GDP and CPI rebasing represents a vital step in modernising financial measurements and aligning them with present realities. Whereas the rise in per capita earnings will bolster Nigeria’s picture and supply new alternatives, it additionally highlights the necessity for deliberate actions to handle poverty by all Nigerians, and policymakers should make sure that statistical progress is matched by actual enhancements in residing requirements.

In the previous couple of months, there have been talks about rebasing the 2 essential financial indicators – the Gross Home Product (GDP) and the Shopper Value Index (CPI).

Whereas the GDP calculates the worth of all items and providers within the financial system inside a 12 months, the CPI calculates the common change in costs over time that customers pay for a basket of products and providers. It’s a key measure of inflation and displays the price of residing.

Each have a base 12 months, which is in contrast with different years within the compilation. For instance, the final rebased 12 months for GDP in Nigeria was 2014.

Not too long ago, the Nationwide Bureau of Statistics (NBS) indicated that it might launch the outcomes of the newly rebased GDP and CPI by the tip of January. This has excited stakeholders within the financial system as a result of rebasing the 2 essential financial indicators would imply elevated nationwide earnings for the nation.

It’s because the result’s more likely to result in a rise in per capita earnings in Nigeria. In spite of everything, the GDP is anticipated to broaden because of the inclusion of latest financial actions within the calculation.

In keeping with the press launch issued by the NBS on Monday, “The actions of some sectors of the financial system have grown tremendously for the reason that final rebasing, making them vital amongst different sectors of the financial system. They embody Marine & Blue Financial system, Artwork, Tradition, Tourism and Artistic Financial system, Data and Expertise, Innovation, and Digital Financial system actions.”

When rebased, Nigeria’s GDP is anticipated to broaden, reflecting a extra correct image of the financial system’s true dimension. Consequently, per capita earnings — GDP divided by inhabitants — is more likely to improve, even when actual incomes stay unchanged.

Given these insights, it’s protected to say that the outcome holds profound implications for Africa’s largest financial system. As these figures are up to date to replicate present financial realities, the outcomes may reshape perceptions of Nigeria’s financial standing and affect policymaking, funding, and citizen welfare. That is definitely good music to most of Nigeria. However would it not point out actual progress within the financial system?

Looking back, Nigeria’s GDP almost doubled throughout the rebase of 2014, making it Africa’s largest financial system, surpassing South Africa. This was as a result of the rebasing accounted for brand spanking new industries like telecommunications, leisure (Nollywood), and e-commerce, which had grown considerably for the reason that earlier base 12 months of 1990.

Whereas this statistical adjustment doesn’t essentially translate into speedy enhancements in residing requirements, its implications are far-reaching.

…Nigeria’s standing in international rankings, portraying the nation as extra affluent, could improve. This may positively affect worldwide buyers, who typically contemplate financial indicators like GDP and earnings ranges when making choices. A rebased GDP may bolster confidence in Nigeria as an funding vacation spot, probably attracting international direct funding (FDI).

Pundits who’re involved about actual earnings progress, have worries about statistical figures that might create an impression of upper earnings for an already improvised financial system, wherein nearly all of residents are multidimensionally poor. They worry that individuals could be worse off within the face of a probable improve in inflation, which has climbed to 34.80 per cent in December, up from 34.60 per cent in November 2024. This marks the fourth consecutive month-to-month improve, pushed primarily by heightened demand throughout the festive season, main to cost surges in meals and non-alcoholic drinks.

Meals inflation barely decreased to 39.84 per cent, year-on-year, in December, in comparison with 39.93 per cent in November. Notable value will increase had been noticed in staples similar to yams, candy potatoes, corn, rice, and fish.

These inflationary traits have exacerbated Nigeria’s cost-of-living disaster, with greater than 60 per cent of the inhabitants residing in poverty, and plenty of spending over 63 per cent of their earnings on meals.

Nonetheless, a rise in gross earnings and per capita earnings because of the rebasing would neutralise these adverse results. Listed below are a couple of components that can advance the optimistic affect.

First, Nigeria’s standing in international rankings, portraying the nation as extra affluent, could improve. This may positively affect worldwide buyers, who typically contemplate financial indicators like GDP and earnings ranges when making choices. A rebased GDP may bolster confidence in Nigeria as an funding vacation spot, probably attracting international direct funding (FDI).

Secondly, the upper per capita earnings will immediate policymakers to re-evaluate socioeconomic methods. For example, the federal government would possibly shift its focus from poverty alleviation to wealth distribution and middle-class growth. That is carefully associated to the target of the Tinubu tax reforms, which was lately embraced by the Nigerian Governors Discussion board (NGF). Nonetheless, this might additionally imply a discount in entry to worldwide assist or concessional loans, as Nigeria would possibly not qualify below sure international thresholds for low-income international locations.

On the identical time, a rebased GDP that highlights underrepresented sectors similar to know-how, leisure, and providers may spur efforts to diversify the financial system. Policymakers would possibly prioritise these rising sectors, decreasing reliance on oil and addressing the vulnerabilities related to fluctuating international oil costs.

But, rebasing the CPI will present extra correct inflation knowledge, which might affect financial coverage. This might result in better-targeted interventions by the Central Financial institution of Nigeria (CBN) to regulate inflation and stabilise the naira, thereby immediately impacting the price of residing for Nigerians.

The Nigerian creditworthiness would additionally improve as a result of the debt-to-GDP ratio can be lowered. Within the eyes of worldwide monetary establishments, such because the Worldwide Financial Fund (IMF) and World Financial institution, Nigeria could also be considered as a extra creditworthy nation. This may end up in higher entry to loans with beneficial phrases and lowered borrowing prices.

The elevated GDP may also improve the entry of Nigeria to worldwide markets. Increased earnings ranges can pave the best way for Nigeria to affix extra unique financial teams just like the Organisation for Financial Co-operation and Growth (OECD), resulting in the supply of alternatives to affect international financial insurance policies.

Extra importantly, and at the moment in our nationwide life, a stronger financial system backed by increased per capita earnings can stabilise and strengthen the naira in worldwide foreign money markets. A stronger foreign money enhances Nigeria’s buying energy globally, reduces import prices, and fosters financial stability.

Intently associated is the truth that Nigeria’s elevated financial standing can improve its bargaining energy in negotiating commerce offers, enabling entry to extra helpful phrases in worldwide commerce agreements.

Equally, there shall be an improved Human Growth Index (HDI), as excessive per capita earnings typically correlates with higher well being, training, and residing requirements, which may increase Nigeria’s HDI rating. This improved rating can replicate positively on Nigeria’s international picture and appeal to worldwide partnerships.

Nigeria may also doubtless graduate from assist dependency. With increased earnings ranges, Nigeria could scale back its dependence on worldwide assist, transitioning in direction of self-sufficiency and enhanced financial sovereignty. That will doubtless appeal to international skills and partnerships. A wealthier financial system can appeal to international expertise, buyers, and innovators looking for alternatives in Nigeria’s rising markets.

Different international locations and organisations could search partnerships with Nigeria, recognising it as an influential participant within the international financial system.

Extra importantly, and at the moment in our nationwide life, a stronger financial system backed by increased per capita earnings can stabilise and strengthen the naira in worldwide foreign money markets. A stronger foreign money enhances Nigeria’s buying energy globally, reduces import prices, and fosters financial stability.

The actual earnings will, due to this fact, on the finish of the day enhance, as economists would say, all issues being equal.

All issues have been equal as a result of the federal government performs a pivotal position in making actual earnings enhance.

This should be sustained by infrastructure growth and human capital funding that can maximise these advantages and guarantee inclusive progress that uplifts all Nigerians.

For atypical Nigerians, the implications of the upper earnings may result in improved entry to worldwide markets and extra jobs because of elevated investments.

On the entire, the deliberate GDP and CPI rebasing represents a vital step in modernising financial measurements and aligning them with present realities. Whereas the rise in per capita earnings will bolster Nigeria’s picture and supply new alternatives, it additionally highlights the necessity for deliberate actions to handle poverty by all Nigerians, and policymakers should make sure that statistical progress is matched by actual enhancements in residing requirements.

Isiaq Ajibola, the previous Managing Director of Day by day Belief, writes from Abuja.