Would GDP rebasing make any meaningful impact on real income?, By Isiaq Ajibola
In the last few months, there have been talks about rebasing the two important economic indicators – the Gross Domestic Product (GDP) and the Consumer Price Index (CPI).
While the GDP calculates the value of all goods and services in the economy within a year, the CPI calculates the average change in prices over time that consumers pay for a basket of goods and services. It is a key measure of inflation and reflects the cost of living.
Both have a base year, which is compared with other years in the compilation. For example, the last rebased year for GDP in Nigeria was 2014.
Recently, the National Bureau of Statistics (NBS) indicated that it would release the results of the newly rebased GDP and CPI by the end of January. This has excited stakeholders in the economy because rebasing the two important economic indicators would mean increased national income for the country.
This is because the result is likely to lead to an increase in per capita income in Nigeria. After all, the GDP is expected to expand as a result of the inclusion of new economic activities in the calculation.
According to the press release issued by the NBS on Monday, “The activities of some sectors of the economy have grown tremendously since the last rebasing, making them significant among other sectors of the economy. They include Marine & Blue Economy, Art, Culture, Tourism and Creative Economy, Information and Technology, Innovation, and Digital Economy activities.”
When rebased, Nigeria’s GDP is expected to expand, reflecting a more accurate picture of the economy’s true size. Consequently, per capita income — GDP divided by population — is likely to increase, even if real incomes remain unchanged.
Given these insights, it is safe to say that the result holds profound implications for Africa’s largest economy. As these figures are updated to reflect current economic realities, the outcomes could reshape perceptions of Nigeria’s economic standing and influence policymaking, investment, and citizen welfare. This is certainly good music to most of Nigeria. But would it indicate real growth in the economy?
In retrospect, Nigeria’s GDP nearly doubled during the rebase of 2014, making it Africa’s largest economy, surpassing South Africa. This was because the rebasing accounted for new industries like telecommunications, entertainment (Nollywood), and e-commerce, which had grown significantly since the previous base year of 1990.
While this statistical adjustment doesn’t necessarily translate into immediate improvements in living standards, its implications are far-reaching.
…Nigeria’s standing in global rankings, portraying the nation as more prosperous, may increase. This can positively influence international investors, who often consider economic indicators like GDP and income levels when making decisions. A rebased GDP could bolster confidence in Nigeria as an investment destination, potentially attracting foreign direct investment (FDI).
Pundits who are concerned about real income growth, have worries about statistical figures that would create an impression of higher income for an already improvised economy, in which the majority of citizens are multidimensionally poor. They fear that people might be worse off in the face of a likely increase 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 monthly increase, driven primarily by heightened demand during the festive season, leading to price surges in food and non-alcoholic beverages.
Food inflation slightly decreased to 39.84 per cent, year-on-year, in December, compared to 39.93 per cent in November. Notable price increases were observed in staples such as yams, sweet potatoes, corn, rice, and fish.
These inflationary trends have exacerbated Nigeria’s cost-of-living crisis, with more than 60 per cent of the population living in poverty, and many spending over 63 per cent of their income on food.
However, an increase in gross income and per capita income as a result of the rebasing would neutralise these negative effects. Here are a few factors that will advance the positive impact.
First, Nigeria’s standing in global rankings, portraying the nation as more prosperous, may increase. This can positively influence international investors, who often consider economic indicators like GDP and income levels when making decisions. A rebased GDP could bolster confidence in Nigeria as an investment destination, potentially attracting foreign direct investment (FDI).
Secondly, the higher per capita income will prompt policymakers to re-evaluate socioeconomic strategies. For instance, the government might shift its focus from poverty alleviation to wealth distribution and middle-class expansion. This is closely related to the objective of the Tinubu tax reforms, which was recently embraced by the Nigerian Governors Forum (NGF). However, this could also mean a reduction in access to international aid or concessional loans, as Nigeria might no longer qualify under certain global thresholds for low-income countries.
At the same time, a rebased GDP that highlights underrepresented sectors such as technology, entertainment, and services could spur efforts to diversify the economy. Policymakers might prioritise these emerging sectors, reducing reliance on oil and addressing the vulnerabilities associated with fluctuating global oil prices.
Yet, rebasing the CPI will provide more accurate inflation data, which would influence monetary policy. This could lead to better-targeted interventions by the Central Bank of Nigeria (CBN) to control inflation and stabilise the naira, thereby directly impacting the cost of living for Nigerians.
The Nigerian creditworthiness would also increase because the debt-to-GDP ratio would be reduced. In the eyes of international financial institutions, such as the International Monetary Fund (IMF) and World Bank, Nigeria may be viewed as a more creditworthy nation. This can result in better access to loans with favourable terms and reduced borrowing costs.
The increased GDP will also enhance the access of Nigeria to international markets. Higher income levels can pave the way for Nigeria to join more exclusive economic groups like the Organisation for Economic Co-operation and Development (OECD), leading to the provision of opportunities to influence global economic policies.
More importantly, and at this time in our national life, a stronger economy backed by higher per capita income can stabilise and strengthen the naira in international currency markets. A stronger currency enhances Nigeria’s purchasing power globally, reduces import costs, and fosters economic stability.
Closely related is the fact that Nigeria’s elevated economic status can enhance its bargaining power in negotiating trade deals, enabling access to more beneficial terms in international trade agreements.
Similarly, there will be an improved Human Development Index (HDI), as high per capita income often correlates with better health, education, and living standards, which can boost Nigeria’s HDI ranking. This improved ranking can reflect positively on Nigeria’s global image and attract international partnerships.
Nigeria will also likely graduate from aid dependency. With higher income levels, Nigeria may reduce its dependence on international aid, transitioning towards self-sufficiency and enhanced economic sovereignty. That may likely attract global talents and partnerships. A wealthier economy can attract global talent, investors, and innovators seeking opportunities in Nigeria’s growing markets.
Other countries and organisations may seek partnerships with Nigeria, recognising it as an influential player in the global economy.
More importantly, and at this time in our national life, a stronger economy backed by higher per capita income can stabilise and strengthen the naira in international currency markets. A stronger currency enhances Nigeria’s purchasing power globally, reduces import costs, and fosters economic stability.
The real income will, therefore, at the end of the day improve, as economists would say, all things being equal.
All things have been equal because the government plays a pivotal role in making real income improve.
This must be sustained by infrastructure development and human capital investment that will maximise these benefits and ensure inclusive growth that uplifts all Nigerians.
For ordinary Nigerians, the implications of the higher income could lead to improved access to international markets and more jobs due to increased investments.
On the whole, the planned GDP and CPI rebasing represents a critical step in modernising economic measurements and aligning them with current realities. While the increase in per capita income will bolster Nigeria’s image and offer new opportunities, it also highlights the need for deliberate actions to address poverty by all Nigerians, and policymakers must ensure that statistical growth is matched by real improvements in living standards.
Isiaq Ajibola, the former Managing Director of Daily Trust, writes from Abuja.
