Nigeria GDP Rebased To $510 Billion—A Reflection And Need To Redistribute Wealth

“Rebasing the GDP provides more accurate data on the economy to enable policy-makers make informed decisions and policy choices to tackle social problems like poverty and unemployment. Nigeria's rebased GDP is expected to be a more accurate reflection of the structure and size of current economic activities in the country, presenting a clearer sectoral distribution and performance.” ----- Ngozi Okonjo-Iweala

Hurray at last it is official: Nigeria's economy is the biggest in Africa and the 26th largest in the whole world. At GDP level of over $500Billion for the year ended 31st December, 2013, Nigeria's GDP has frog leapt that of the two rival contenders in the African continent, Egypt and South Africa, with the later the undisputed champion for many years until this rebasing, which to be very candid, is fairly more reflective of the current size and composition of the Nigerian economy.

I had no doubt in my mind that the old system of recording our GDP was understating the figure in both size and composition and not taking into full account the total economic activities taking place in Nigeria annually, because of our poor data collection methods and the burgeoning “informal economy,” with unemployment forcing many into “unrecorded and unregistered” businesses and self-employment plus recent growths in the Service industries like Telecommunication, Hospitality and the Billions of Dollars churned in by the Nollywood industry that was un-captured in the old system of recording our GDP.

Before we get carried away by singing too much hosanna, it is important we understand what these numbers mean; yes, it is just a “nominal” number, that could be explored and exploited if the managers of the Nigerian economy know what they are doing, or rather what they should now do to gain competitive advantage and remain investor friendly compared to say our biggest rival in the continent, South Africa.

On the other hand, $510B could be a “meaningless” number if all it does is to “massage” the ego of “political jobbers” who wants “bragging rights” against South Africa, a country with far better infrastructure, better managed economy, more investor friendly and possibly better security enforcement where the rule of law truly works than Nigeria is. Anyone deluding themselves that Nigerian economy, is by this “rebasing” stronger and better than the South African economy in terms of productivity and investor friendliness should quickly go see a Psychiatrist before delirium kills them off. For starters, all the indices for growth enhancement of any economy tilt, by a long mile, in favour of South Africa. They generate over 42,000MW of Electricity annually, whilst Nigeria with its huge size and population cannot muster a tenth of that, struggling to get 4000MW of electricity for a population of 170million people! Their Roads and telecommunication technology are head and shoulders above Nigeria's with their Hi-tech companies taking over Nigerian economic space like “Bees around the honey pot,” huge multi-nationals like MTN-taking a significant, if not lion share-of Nigeria's mobile Telephony; and Eskom, the giant South African Energy company with strong roots in Nigeria trying to rescue us from our long sleep in darkness and “Generator economy;” You have their Multichoice and DSTV taking over our TV viewing from NTA and local Television stations. And what about Banking and Finance (the likes of Stanbic Bank) , and then Hospitality where their multinational- Protea Hotel is fast taking over the Nigerian hotel and holiday accommodation business?

So please no euphoria, and any attempt to compare with South Africa, and delude ourselves that we are better than other African countries, including next door Ghana, when we are far from that. GDP figures are absolutes, and absolute figures most times don't tell nothing- just the size of an economy. By the time you put the huge Nigerian population into the equation, you find that we remain one of the poorest in the world, even with the rebased GDP figures just released by the Nigerian Bureau of Statistics. Again a hint of caution in taking numbers derived from Nigerian statisticians that have not been independently tested and ratified by international bodies like World Bank and similar institutions with the wherewithal to conduct modern scientific research and data collection. Do we even know our true population + or – 2% standard deviation? What about the numbers churned out by INEC at every General Election times that bear no resemblance to the reality of the voting age group in different communities across Nigeria? And the anomalous “Inflation rates,” churned out periodically by same NBS, that bear no resemblance to the economic reality of the biting inflation harassing Nigerians from time to time? And what if South Africa wants a piece of the delirium and does their own “Rebasing of their GDP?” At a per capita GDP ratio of $12,000 (per South African) they still trash us with a GDP per capita of $2700 (before Rebasing) and still a miserable $3,000 (per Nigerian) after rebasing!

WHAT IS NOW REQUIRED OF THE NIGERIAN ECONOMY

Like I said earlier, we should not get carried away by these GDP numbers. We may be the biggest economy in Africa and churn out bigger GDPs (I doubt if we can surpass the $510B from the 2013 rebasing next year, as a number of factors, apart from suspect Accounting, may have accounted for that humongous figure, not least the PHCN sales that generated about $10Billion dollars to the Federal budget and various other Asset sales by the various governments of the federation) than other countries in the continent, but Nigeria remain a very poor country when you compare its GDP/Capita levels, the misery indices from high unemployment, poor human capital development- no decent hospitals and the schools and universities are in shambles, turning out “graduates” that cannot compete in the global village that world economies have now become; our lifespan remain dismal compared to Ghana and even nearby Togo and Benin republic, never mind South Africa, Algeria, Angola Tunisia or Libya, at more higher levels than Nigeria.

So what to do? The managers of the Nigerian economy- from the Presidency, the National Assembly, Governors and their state Assemblies, and more importantly the Monetary and Fiscal policies formulators and executors have to change gear to “Second Base!” The politicians and even the fiscal authorities are letting Nigeria down so much, with their excessive greed and incompetence. How on earth will so few get so much of the Nigerian riches whilst a vast majority wallow in abject poverty, and the politicians, the ministry of Finance and the Tax authorities don't know what to do to redistribute this huge wealth (GDP) on a more fairer and inclusive basis? Whatever happened to using Taxation as Income redistribution tool and “Economic stabiliser?”

The ministry of Finance and the FIRS have a huge job to do and they have been a disappointment to this writer over time, and let the Nigerian very poor (almost 80% of the population) down in such a disgraceful manner. Look, Ngozi Okonjo- Iweala and co: How much taxes are those Crooks parading Private jets all over the place in MM Airport, Lagos and Nnamdi Azikiwe Airport, Abuja, Hangers paying as “Excess, insanely rich, taxes?” Just 5% taxes of the value of those jets will do for this group of morons- majority of the cash for their Jet acquisitions stolen, by the thieving elites who own them, from the very poor. Tax them, big time, and they can easily pay! Then increase VAT to say a minimum of 10% for all luxury goods, often demanded by the obscene rich; and then gradually remove “Personal Income Tax” (PAYE) from any worker earning less than N4million per annum. Then the highly paid workers in Banking, Telecom, Oil industry and such other highly paid “fat cats” should have their “total Emoluments,” including all forms of Allowances that are currently not subject to taxation, all taxed- with the upper N10M attracting 40% tax, per annum after the first N10million is taxed at a reduced rate of say 20%. These can be varied within certain income ranges- just making guideline recommendations! I don't know why in this 21st century lazy FIRS is still having uniform Tax allowances, tax free pay and uniform tax on every amount earned. Why can't they have individual tax codes as well as Emergency codes for the vast majority of PAYE tax payers?

The drivers of the country's monetary policy also have big work to do. The Central bank managers of the last 15 years have really impressed and credit to the last three Governors for the incremental work they have done, and I hope the newly approved governor would learn some lessons from the work of the last three and work towards bettering their efforts. I have no doubt that Mr Godwin Emefiele, current MD of Zenith Bank Plc, is more than capable. I saw him on NTA during the Senate screening put a superlative performance to the senators and he must know now that there is a big job ahead, as for me, and with the autonomy of the CBN, he is probably the most powerful person in Nigeria, probably more powerful than the minister of Finance, for that is how it should be in any half decent economy! I want him, however, to complement the works of the Minister of Finance and Fiscal policies formulators to implement more cost-effective and efficient policies to reduce the income gap between the very rich and the abjectly poor; as well as device and implement policies that will reduce the unacceptable unemployment and poverty level in the country. A starting point will be to drive monetary policies that will encourage self-implement especially at the SME (Small and medium Enterprise) levels- more capable of generating fast employment than Government. This could be done by actions to reduce the unacceptably high interest rates; exchange rate stability (to aid better planning by local investors) and segmental/sector allocation adjustment to favour Agriculture and Manufacturing sector lending by Commercial banks.

And finally to Ngozi Okonjo-Iweala, the minister of Finance and coordinating minister, there is urgent need to cut waste and mismanagement across the Nigerian budgeting system. Your budgets are over-padded, with waste and inflation on the expenditure side, whilst income appear to be understated and deflated, such that there are so many unnecessary leakages in the system that should not be acceptable in today's Public sector Financial management and for an international bureaucrat of your experience and stature. You need better Management Accountants in your team to do the Budgetary Control and monitoring aspects of your Public finances.

In conclusion, I would say there are more challenges ahead, even though we can enjoy the leap of our GDP growth for the moment. Let the growth ricochet to every Nigerian, not a select few, over pampered kleptomaniacs!

From: Tony Ishiekwene
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