In an economy like Nigeria, where citizens always feel exploited by the government, there is always a pushback from the people when economic growth is mentioned, as in the case of the recently released rebased gross domestic product (GDP). Moses Waniko, an expert in national accounting and technical assistant to the Statistician General of the Federation, Semiu Adeniran, in this interview with JOSEPH CHIBUEZE, explains the fundamentals of GDP computation, why it does not equate to improved well-being, as well as what the recent rebasing means for the economy.

There has been so much noise about GDP growth in recent times. Of what importance is GDP data to the ordinary Nigerian?
The GDP is the market value of all goods and services produced within a country in each period. It measures overall economic activity and signals the direction of economic growth. It is also a barometer to measure the health of the economy. It is an internationally recognised indicator for measuring the size of an economy in each period. The GDP growth rate is a measure of the rate of change that a nation’s GDP experiences from one period to another, either annually or quarterly. GDP growth is important but not synonymous with economic development. Development encompasses broader measures of human progress beyond measuring output (GDP) growth, which mostly measures economic progress. In addition to measures of economic progress, development includes social and environmental measures that are not well captured by GDP.

There are three approaches to computing GDP. First is the expenditure approach. This approach captures spending by key economic agents in an economy. It is the sum of consumption expenditures by households, investment expenditures by firms, government expenditures as well as the difference between exports and imports, mathematically expressed as GDP = C + I + G + (EX – IM). There is also the income approach, which measures the income earned by various factors of production. It is a sum of compensation to workers, rental income, taxes on production and imports (less subsidies), interest, miscellaneous payments and depreciation.

The third is the production or value-added approach. It is gross output (GO) less the purchase of intermediate inputs used to produce the final products.

What are the technicalities of GDP rebasing/re-benchmarking?
Rebasing/re-benchmarking of the national account series (GDP) is the process of replacing an old base year used to compile volume measures of GDP with a new and more recent base year or price structure. Economies are dynamic. They grow, they shrink, they add new sectors, new products and new technologies while consumer behaviour and tastes change over time.

Rebasing / Re-benchmarking is used to account for these changes so as to give a more current snapshot of the economy, as well as improve the coverage of economic activities included in the GDP compilation framework. The base year provides the reference point to which future values of the GDP are compared. It is a normal statistical procedure undertaken by the national statistical offices of countries to ensure that national accounts statistics present the most accurate reflection of the economy as possible.

Does this process have real economic benefits?
The key benefit of the rebasing exercise is that its results enable policy makers and analysts to obtain a more accurate set of economic statistics that is a truer reflection of current realities for evidence-based decision-making. It also reveals a more accurate estimate of the size and structure of the economy by incorporating new economic activities that were notpreviously captured in the computational framework.

Rebasing enables the government to have a better understanding of the structure of the economy, an indication ofsectoral growth drivers, sectors where policies and resources should be channelled in order to grow the economy, create jobs, improve infrastructure and reduce poverty.

How often should a country rebase its GDP?
The UN Statistical Commission (UNSC) recommends that countries rebase every five years. However, some countries do so at intervals of less than five years.

However, the GDP rebasing is a resource-intensive project. It requires major surveys that are highly capital-intensive, such as the Nigeria living standard survey (NLSS), agricultural census and census/survey of establishments. The output of these surveys serves as input into the rebasing process. Sourcing the funds to conduct all of these surveys is always difficult, hence the lag in rebasing interval.

What influenced the choice of a base year?
The last exercise was done in 2014. The UN Statistical Commission (UNSC) recommends that countries rebase their national accounts (GDP) estimates every five years. An appropriate base year is one for which data is readily available and which witnessed relative stability. Previously, Nigeria’s base year was 2010, but a new base year of 2019 was selected for the rebasing exercise.

How long did it take to complete the exercise?
The time from preparation to publishing the result of the rebasing exercise took approximately five years. The preparatory work for the rebasing exercise commenced in the last quarter of 2018. Since then, several activities have been undertaken, which include field surveys for certain economic activities that were not adequately captured previously, such as theresearch and development (R&D), trade and transport margin, as well as water supply, waste management and remediation. There was also validation with sector experts and technical assistance from international development partners.

What methodology did the NBS use for the rebasing exercise?
The exercise was conducted in line with internationally recognised methodology procedures and guides. The National Bureau of Statistics (NBS) started with an update of its survey frame, complemented by a listing exercise. Three major methodological pillars were used to compile the rebased GDP estimates – System of National Accounts (SNA 2008 version), International Standard Industrial Classification (ISIC Revision 4) and Central Product Classification (CPC version 2). Construction of Supply and Use Tables (SUT) for Nigeria Balance of Payment Version 6, Government Finance Statistics Manual 2014, was also used. These are the most up-to-date methodologies in national accounting. Less than half of the countries in the world have been able to make these upgrades successfully.

The SNA is the internationally agreed standard set of recommendations on how to compile measures of economic activity. The ISIC is the international reference for the classification of productive activities. Its main purpose is to provide a set of activity categories that can be used for the collection and reporting of statistics according to suchactivities.

The CPC is a classification based on the physical characteristics of goods or the nature of services rendered. Each type of good or service is distinguished in the CPC in such a way that it is usually produced by only one activity as defined by the ISIC. The CPC covers products that are the output of economic activities.

All the above are applied to the Supply and Use Table (SUT). The SUT contains a pair of tables, namely, the Supply table and the Use table. The SUT combines the product balances of all individual products (or groups of products) in a matrix framework to present a coherent picture of how goods are produced and then supplied versus how they are used within the whole economy.

The development of the Supply and Use Table (SUT) formed the basis of the final estimates. Other refinements that were incorporated include the estimation of public administration, the conduct of the National Census on Commerce, Industries and Businesses (NCCIB) and the National Agricultural Sample Census (NASC). The data from these censuses were utilised in this rebasing.

Do the new numbers imply that Nigeria is now a richer country?
No, rebasing will not change the facts of our economy overnight. It will not make poverty and unemployment disappearovernight; but it will give us the tools and the policy ability to tackle these problems in order to reduce poverty and improve the welfare of our people. The rebased GDP numbers imply that the level of economic activity is much higher than previously reported. It indicates a clearer picture of Nigeria’s economic landscape and the significant opportunity for growth and wealth creation in the Nigerian economy.