Explainer: What GDP, CPI rebasing means for economy

The National Bureau of Statistics (NBS) is currently poised to undertake a significant re-evaluation of Nigeria’s Gross Domestic Product (GDP) and the Consumer Price Index (CPI). This decision is met with high expectations: that the rebasing will reflect a larger economy, while potentially lowering reported inflation rates. History reminds us of a similar situation in 2014, when Nigeria reclaimed its title as Africa’s largest economy, demonstrating a staggering 89 percent increase in GDP, surging to $510 billion, alongside a moderate inflation rate of 8.05 percent.

However, during a recent information workshop held collaboratively with the Nigerian Economic Summit Group in Lagos, the NBS cautioned that rebasing does not inherently signal a more robust economy or a contraction. Instead, it serves to provide a precise evaluation of Nigeria’s economic landscape. According to Adeyemi Adeniran, the statistician general and CEO of the NBS, “Rebasing is a very vital exercise that ensures our economic indicators are accurate, reflecting the updated structure of our economy.” This verification is critical, particularly with the emergence of new sectors and the restructuring of existing ones.

Why does GDP rebasing matter? Many governments globally revise their GDP measurements every three to five years to adjust for changes in production and consumption patterns. Nigeria hadn’t undertaken a rebasing since 1990 until the considerable overhaul in 2014. The process involves updating an old base year to a more contemporary one to mirror price changes for goods and services produced within the country. The NBS intends to incorporate dynamic sectors such as the digital economy, modular refineries, pension fund administration, and national health insurance schemes, thereby enhancing the accuracy of economic activity measurement.

A significant implication of this rebasing effort is the expected decline in tax-to-GDP and debt-to-GDP ratios, which may promote better fiscal balance. Moreover, an anticipated increase in per capita income, currently estimated at around $877, suggests positive movements in economic wellbeing.

As Nigeria prepares for this rebasing, pivotal questions arise: Will the country reclaim its status as Africa’s largest economy? Experts recognize that while the rebasing may result in an increase in nominal GDP, this might not reflect the same impressive growth seen a decade ago. Amaka Anku, an Africa director at Eurasia Group, indicates that despite a nominal increase, potential progression may be undermined by the realities of a weakened naira and a second economic recession in five years.

Analysts from CardinalStone predict that the rebasing might enhance the capturing of economic activations, ultimately supporting planning initiatives. Nonetheless, this exercise could lead to the contraction of Nigeria’s informal economy, as it pushes for closer accountability and measurement of economic activities.

When it comes to rising prices, the NBS clarifies that the rebasing won’t directly cause shifts in consumer prices. Instead, it aims to provide a broader perspective on price changes over time. As part of this rebasing effort, four new indices will augment the CPI calculations. These include a services index and energy index at both national and state levels, along with a farm produce index and goods index. The introduction of these components is set to enhance the accuracy of inflation data, which is crucial for informed policy-making and business strategies moving forward.

The NBS has selected 2019 as the new base year for GDP calculations, while 2024 has been designated for CPI recalibrations. These selections are significant, as they reflect periods of relative economic stability, especially when set against the tumultuous backdrop of recent events like the COVID-19 pandemic and subsequent policy shifts.

The rebasing is also expected to expand the CPI basket from 740 to 960 items, thereby providing a more nuanced perspective on price dynamics. The reweighting of the inflation basket may lead to a diminished impact from food and non-alcoholic beverage price fluctuations on overall inflation readings. Conversely, sectors like transportation and accommodation may receive increased weightings, suggesting a shift in the factors influencing inflation.

Despite these structural changes aimed at improving economic accuracy, many stakeholders remain concerned about the tangible impacts of such adjustments on everyday life. With over 129 million Nigerians living below the national poverty line, the anticipated benefits of a more robust economic profile might be experienced statistically rather than materially. Thus, it becomes vital to ensure that GDP improvements translate into comprehensive economic relief for the populace.

In conclusion, Nigeria’s GDP and CPI rebasing represents a critical juncture for the nation’s economic landscape. While the adjustments promise a clearer and larger picture of the economy, the reality of ongoing socioeconomic challenges cannot be overlooked. As analysts watch closely, the outcomes of this rebasing will reveal more than just statistical growth—it will test the resilience of Nigeria’s economy and its capacity to transform data into meaningful change for its citizens.

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