A few days ago the Nigerian economy became the biggest in Africa by nearly doubling overnight. Did Nigerians suddenly find hoards of buried treasure? Were they showered with cash by airplanes passing overhead?
No, the miracle came about due to the magic of statistics. Indeed, the rebasing, as the feat was called, of Nigerian GDP had long been overdue and was telegraphed well beforehand by Nigerian authorities and economic officials.
Normally, statistical agencies around the world conduct an economic census of their respective economies every ten years or so, but in Nigeria’s case the task had long been put off.
A laborious task in even the richest, stable, and most honestly-run of countries, rebalancing literally requires the agencies tasked with such a Herculean task to count up, as best they can, the financial transactions of every possible enterprise within the country so as to capture an accurate snapshot of all economic activity taking place within it.
Armed with such data and the insights provided by economic theory, statisticians can then calculate an estimate of the value of all goods and services created in the country during that census year, thus creating, like Athena from the head of Zeus, the number we call Gross Domestic Product, or GDP.
Because this task is so immense, it is done infrequently and in intervening years much smaller surveys of economic activity and fancy statistical leg work are used to calculate year-to-year growth from the calculated base. Smaller samples, of course, increase the inherent error contained in the eventual results so rebasing is used to both guide and revise these calculations over time. Rebasing, then, serves as sort of artillery spotter for the year-to-year analytical field guns to home in on.
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Nigeria: Now a $510 billion economy.
Nigeria, unfortunately, last did its rebasing in 1990, and since nearly a quarter century has passed the annual estimates have thus been compounding error for over two decades. In that time a lot has changed. Nigeria democratized, became marginally less corrupt, experienced an oil boom, and developed whole new economic sectors that had not even existed back when the GDP was last rebased. The current effort, then, was long overdue.
So, the result that Nigeria is now Africa’s largest economy was not completely unexpected. While its 89-percent increase and resulting $510 billion size was a bit more than analysts had predicted, it is not necessarily an unreasonably large increase. Ghana, for instance, performed a similar rebasing in 2010 and saw its economy increase by more than 60-percent. So, large jumps can and in fact do happen.
At issue, of course, is just what this increase means. Asset managers quizzed by the London-based Financial Times, for instance, were generally positive and indicated that it showed Nigeria was a country deserving of investor attention.
“South Africa was historically the ‘go-to’ country for investment into Africa,” said one-such manager. “However, the reality is that other regions are increasingly asserting their economic voice.”
This was echoed by Nigeria’s finance minister, who told the press that the rebasing would have a, “psychological impact,” that would reinforce the idea that Nigeria was a country with a large consumer base and thus worthy of foreign investment. It was not, said Minister Ngozi Okonjo-Iweala, merely an exercise in chest-thumping one-upmanship, though it was clearly that, too.
Obasanjo: Jonathan is a threat to stability.
Indeed, the rebasing comes at a crucial time in Nigeria as the West African giant and its embattled president, Goodluck Jonathan, have stumbled recently as a series of crises that have undercut confidence in Lagos.
President Jonathan’s intention to run for an additional term in office, for instance, has led to the split of his ruling People’s Democratic Party and caused significant consternation amongst Nigeria’s Muslims that the democratization pact between Christians and Muslims to share the presidency – a foundation of Nigeria’s post-democratization political stability – is now being threatened.
Many, including former Nigerian President Olusegun Obasanjo have strongly rebuked the move with Obasanjo himself calling it, “morally flawed.”
Boko Haram is out of control.
If political troubles were not enough, internal security is as threatened now as at any time in the country’s history barring the devastating Biafra War during the late 1960s.
Hardline Islamist insurgents calling themselves Boko Haram, which translates roughly into English as “Western learning is forbidden,’ have imposed a reign of terror throughout much of Nigeria’s Muslim north and the military seems utterly unable to control it. They have, in fact, arguably made the situation worse through brutal tactics that have done little to win over hearts and minds in areas affected by the insurgency.
Oil Theft in Nigeria has reached epic proportions.
Meanwhile, in the south, the peace agreement in the oil-rich but ever volatile Niger Delta could fall apart at any moment as locals there become increasingly frustrated with the central government’s inability to come through on its promises to increase local control over oil revenues that originate from oil and gas produced in the delta region.
In fact, even if an insurgency were once again to rear its head there things are already so bad that no one might notice. Organized criminal gangs – many of which are made up of former rebels – have, with the connivance of corrupt officials, stolen so much crude that the theft is having a meaningful impact on the country’s overall oil production.
Lamido Sanusi reveals massive corruption at NNPC.
This, in turn, leads to a necessary discussion of the overall fecklessness and corruption with which anything that touches the Nigerian government generally falls into. The recent surprise firing of the former head of country’s central bank, Lamido Sanusi, after he unveiled what can only be called truly vast amounts of corruption, incompetent management, or both at the Nigerian National Petroleum Company is a case in point.
The widely-respected Sanusi said $20 billion had effectively disappeared from the NNPC’s books between January 2012 and July 2013 – or about four percent of Nigeria’s newly rebased GDP, a staggering amount that many Nigeria watchers have called a theft of historic proportions.
Which necessarily casts some degree of skepticism on the good news reported by the Nigerian government this week about the size and scope of Nigeria’s rebased GDP. There is, to be sure, no reason to suspect the books, like the NNPC’s, have been cooked, but the leap ahead indicates just how useless the country’s political class has been in fostering the conditions necessary for economic growth.
If, after all, this is what Nigeria can do under such terrible conditions, just imagine what could happen if the country suddenly found itself in possession of a competent, honest government that truly desired to see its people flourish. It staggers to mind to think of the possibilities, and, ironically, makes the case for foreign investment into Nigeria even stronger. Things, after all, cannot possibly get worse.
But imagining a well-run Nigeria means that the country we know as it currently exists today would completely cease to be. It would mean we would see sustainable growth in a variety of sectors across the width and breadth of the Nigerian economy, not merely an ugly scramble for oil revenues and their associated economic rents as stands presently.
It means far fewer than 70-percent of its population would live in abject poverty and, most of all, it would mean far, far fewer private jets, fat Swiss bank accounts, and grand foreign estates for its piratical political class.