Nigeria is now the largest economy in Africa after rebasing it’s gross domestic product(GDP). Reabasing is usually done every 5 years but Nigeria waited 24 years to do theirs, probabaly due to strategic reasons. It appears Nigeria officials wanted to get some debt forgiveness from Western countries and pay off it debt before embarking on this exercise. Rebasing is defined by the United Nation as the “process of replacing present price structure (base year) to compile volume measure of gross domestic product with a new more recent base year”. Rebasing is a good move and major development for Nigeria.
Rebasing captured the structural changes in the economy especially in banking, telecom and entertainment sector where Nigeria recorded dramatic growth in recent years. Nigeria gross domestic product is now $510 billion ahead of South Africa’s $370 billion and Egypt’s $257.29.
This is a very positive development for Nigeria not because it will change life of average Nigerian in the short run. The practical impact of this action is the elevation of the status of Nigeria in terms of the economic size but did not necessary show that average Nigeria prospered the day before or after this announoucement. However, it is always better to use more accurate data to ascertain the true picture of any country’s overall economic health. Proper diagnosis of any country’s economic health will help government officials concentrate on areas that need improvement. Nigeria economy has been growing at an average yearly rate of 7 percent. Healthy growth rate is critical for Nigeria in-order to keep up with the high population growth.
Again, it should be noted that rebasing of nominal GDP does not automatically mean that Nigerians are enjoying higher standard of living. GDP or income per capita is a better measure of any country’s living standard. China is the second largest economy in the world after United States, but that does not mean that Chinese are more prosperous than Japanese or western European countries. South Africa still has a higher standard of living with GDP per capita of $7,689 compared to Nigeria’s $2,689.
Pros and Cons of Nigeria GDP rebasing.
Pros:
Rebasing will attract investors and encourage economic growth. Growth will come from investors who will suddenly realize the economic potential of Nigeria and high rate of returns from investments.
Rebasing will improve Nigeria budget deficit and debt to GDP ratio as well as the size of import burden and reduction of size of the current account surplus which has been shrinking for sometime now.
Nigeria market size will likely increase as a result of this rebasing since more investment means more economic growth and further expansion of GDP.
Cons:
Rebasing will lead to a slower rate of real GDP growth which will decrease to 5% from current rate of 7%.
Rebasing will expose weak Nigeria tax base. Nigeria tax base and collection system is poor and unlikely to improve any time soon.
Nigeria is a country with incredible potential with slow but steady economic and political development which is often overshadowed by the negatives stories coming out of the country. The world will definitely take a second look at Nigeria and accord her it rightful place in the community of nations. Rebasing has now moved Nigeria from low income to medium income country with overall healthy economy and high gross domestic product. Nigeria need to create conducive environment for more domestic and foreign investment by mounting all out war aganist corruption. Provision of steady power supply is also critical for Nigeria development. Atlast, there is a glimmer of light at the end of the tunnel for Nigerians if they don’t drop the ball.