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Nigeria’s GDP may rise after rebasing – Kale

By on September 16, 2013

National  Bureau of Statistics (NBS) recently commenced a rebasing exercise of the nation’s Gross Domestic Product (GDP) about 23 years after the last exercise. Statistician General, Yemi Kale, explained  the import of the exercise to journalists and expressed the belief that it could lead to the country’s GDP going up. Snr Correspondent, EFE EBELO, was there. Excerpts.

When do we hope to see the rebasing coming on board? 

We have released our tentative timetable for the exercise and the target is to release it in December. You will notice that a couple of times we have missed our earlier targets, and the reason was that there were so many things that were out of our control. But we are just setting targets because we want to be efficient and because  certain things that we could not control did not come at the right time and so we could not meet our target. Now, we feel that all the things that we are expecting and needed to do our work are now within our control, which is internal.  We have hardworking staff and if we can get all these stakeholders to supply all the data we need, rebasing is about getting data.

We need to get enough data as we mentioned to cover the years of the rebasing and we feel very confident that with the support from the different stakeholders we should be ready by December. By which time we will have preliminary estimates of the rebased GDP and by next year we will now have the final estimate. But the difference between the preliminary and the final are not expected change. You know that GDP is revised every now and then. But by December we will have decent preliminary estimate that you can work with.

What is this rebasing about? 

Rebasing is a statistical activity which could be summed up as updating of the Gross Domestic Product (GDP) computation framework using new data sources, definitions and methods. Using the production approach, GDP is typically calculated as a sum of the “value added” of the production of goods and services in all sectors of the economy. In order to compare one year value added with another, and thus get an idea of whether the economy is expanding or contracting, for each quarter of each year depending on the time frame we are interested in, a new set of numbers for all the sectors is computed. In order for these two amounts to be comparable, they are expressed in constant prices.

The easiest way of doing this is to generate “base year” estimates which will also be relevant for future estimates.

The process of replacing the present price and quantity structure used to compile real measures of GDP with a new or more recent price structure is known as rebasing.

What exactly does it involve?

It involves changing the price and quantity base for individual prices and quantity relatives, updating weights used in  aggregating individual quantity relatives into sub-indexes and aggregating these sub-indexes into more aggregated indexes. We are trying to update the current frame, price and quantity structure used in the calculation of our GDP estimates to come out with more up-to-date figures. One of the reasons that the base year is important is because the data sources and the use of proxies are set in the base year. Even when new information is becoming available, national accountants may be unwilling or unable to add these data to the GDP series. Thus, when the base year is out of date, the GDP series becomes an increasingly unreliable guide to interpreting real economic change.

Secondly, as consumption and production change over time, the implication is that the price structure of the economy changes over time and the base year structure becomes less representative of the economy as time progresses if it is not changed.

Again, we are rebasing due to changes in pattern and classification of sector, subsections and their regrouping due to the adoption of latest SNA of the UN . Currently we are using the ANA 1993 and moving towards SNA 2008  which has a slightly different classification. Rebasing as planned allows us to use the more up to date classification.

When you are computing GDP, you are trying to know the changes that happen in the economy. If you are using 1990, you are basing it on things hat existed in 1990. Now between 1990 and now so many things have changed. Some positive, some negative. If agriculture for example, then   was the biggest part  of the economy and you are drawing a sample out of a system that says agriculture is the biggest part of the economy. Today, you would wrongly advise government that agriculture is the biggest part of the convoy and government policy might be moving towards other sectors. When you rebase, you are trying to take into consideration a lot of changes.

I try to give some example with the telecommunications industry. Many of us now have handsets, our recording gadgets are even handsets. We did not have that in 1990. The airline industry is not as big as it is. There are many other big companies that are coming up now that changed since 1990. In 1990, we were still under military rule, so a lot has changed. Now looking at the economy as the same as it was in 1990, it might misguide policy makers because they would design their policies based on that. They will say a particular sector is fine, but because you are looking at it relative to 1990 when it is not. But you might say a particular sector is not fine because you are looking at it from 1990.

Telecoms sector for example, if you are looking at it in line with 1990, you would expect that it is not as good as it is. So, you have to look at it relative to, what it is now. That is basically what rebasing is all about, using the base year to reflect the more current economy. When we understand what is currently happening, then you can prescribe policies and programmes to tackle the problem. Maybe this is why some people say we are not feeling it on ground. Well, it is hard to feel it on ground if we are still looking at it in relation to 1990. Maybe by the time we rebase, things will become a bit clearer and easier for us to understand.

Why now?

According to the United Nations Statistical Commissions’ System of National Accounts (SNA), rebasing is an economic activity which should be done every five years. However, Nigeria has not rebased it’s national account estimates, which yields the GDP in over 23 years that is, since 1990.

Now just imagine where you were in 1990 and you will get a sense of how important what we are doing by this workshop is. Some of us flew from Abuja to this event, in 1990 and I am sure the journey would have started by road at least since three days before. People now send messages and take phone calls from wherever they are. But in 1990, once you left home, you had no form of communication till you got back home. Some of us were lucky to have one of the 500,000 phone lines that existed assuming they were even working. Twenty-three years ago, some of us had just started working; many others were still in school, training. To further illustrate just how long 23 years is: imagine going through six years of primary school, six years of secondary school, four years of first degree, one year doing a master’s programme and another three years completing a Phd, it will still not be long enough.

How different will this be from the one of 1993 ?

Nigeria is computing GDP for the first time on a state by state basis and also at a time of increasing focus on and demand for data and statistical information which is used to relate sectoral plans evaluate governance, monitor progress and more importantly effectively implement national development strategies especially Mr. President’s Transformation Agenda and the Vision 20:2020

Does it mean we have been planning with wrong data?

We have not been planning with wrong data, we have been planning with accurate data, the difference is that the data we are planning with has to be updated with the most reliable estimates

What drives the demand for data?

In today’s world, there is undeniably an increasing recognition of the importance of statistics leading to an emerging resurgence in the demand for data and statistical information. A cursory look at some key data request indicators at NBS can attest to this: In 2005, just under 50,000 reports were downloaded from the NBS website compared to over one million in 2012. And this does not include requests for data by walk-in users  which was 23 in 2005, compared to 334 in 2012. In 2005, visits to our website was recorded at 36,280 but at the end of 2012, this was nearly 4.5million hits. The number of times NBS was mentioned in the media in 2005 was about 73 times whereas in 2012 we counted 3,365 including online mentions. The sheer number of invitations I have had to honour from international investors, from multilateral organisations and from the media is mind boggling and they are coming in from all over the world.

What do you think is driving the enhanced focus and demand for data?

I classify these factors into two: Exogenous factors and endogenous factors.  The exogenous factors typically involve external demand as dictated by conditions occurring outside the country. As a result of declining growth and business opportunities in most parts of the developed world, several international investors are seeking investment havens elsewhere for opportunities and attention is turning to emerging markets in Africa in general.

After the onset of the 2008 global financial crisis, growth slowed to an average of less than two per cent in the developed world, while many African countries recorded over five per cent growth rates. In fact, Nigeria was identified by Goldman Sachs to possibly be among the top 20 economies by 2025.  Fitch and Standards and Poors gave Nigeria good ratings. Various IMF and World Bank reports praised macroeconomic stability in Nigeria and suggested Nigeria bonds to their emerging market indices. About 60 per cent of the NSE is foreign owned, from less than five per cent in 2000. We can take a look at a number of international brands across various sectors just within the last five years that have entered the Nigerian market.

On the domestic front, what we call endogenous factors, one can point to the increased demand for data due to the increased insistence for accountability and good governance by citizens, as well as the willingness by governments at all levels to demonstrate progress and democratic dividends in various sectors. Of course, the country’s return to strategic planning driven by the National Planning Commission and emphasis on key performance indicators for outputs and outcomes rather than solely on inputs has also led to a sharp increase in endogenous demand for data. The combination of these exogenous and endogenous factors has thus created a scenario where there is immense attention and interest in Nigeria, as a major destination, and with it has come increased demand for information.

Is there a chance that the economy might improve after this exercise?

Well, we did a summary of about 40 countries that have done it. In some countries it went up like Ghana, up to 60 per cent, some by 10 per cent. Some actually went down. So, we may not know whether it is going to go up or go down at this stage. Although preliminary investigation, from what we have seen so far, is suggesting that it will go up. For obvious reasons, if you count the number of hotels and restaurants that opened up in Nigeria in the last five years, it has been tremendous. Manufacture may have been better in 1990 than it is now, we don’t know. Same thing  with agriculture. Agriculture may have been highly subsistent then than now, we don’t know. But the estimates we have seen so far suggest that it is going to go up. Till we complete the exercise we really can’t tell, it can go in either direction.

Well again, I cannot tell whether it will go up or it will go down at this moment. I will be surprised if it will go down by 50 per cent and the reason I am saying this is that we have other surveys. We have agriculture survey, we have consumption survey and if you look at the consumption survey, expenditure survey and you ask me what they are buying. GDP by expenditure approach is consumption, you are involved in consumption, that is you and I. You add investment by government and private sector, you add net export and then you add government expenditure and that is what makes it a GDP. Now if you look at consumption on its own, the consumption numbers we have for 2010 was already much higher than the GDP overall for 2010 almost identical and you have not added investment  by private sector and government. You have not added government expenditure, you have not added net exports. You know that trade balance in terms of exports and imports is there. By the time you add all these with the consumption that is already almost as big as GDP, it is likely it will go down by 50 per cent. But like I said all these depend on weights and the rest of them.

But it appears there is a change in strategy. Can you throw more light?

Ok, I said that we were going to conduct nine surveys. One of this is already completed and we are going to start the other eight simultaneously in the next few days.  The two censuses were more to it, not that the work depended on it. We were actually going to go on with it without the work because we have enough data. The two censuses are a culture  census which has not been done 20 years as well as the censuses of industries and businesses. In our normal survey, we go out to companies, everywhere in Nigeria up to the woman that sells recharge cards on the counter and you are recording. It is not something that you do in a hurry, you are covering every establishment across the entire country and you have to remember that we have 744 local  governments, we have 36 states and you are covering everybody. Just on this road, you can cover about 50 establishments. On agriculture, you are going to every single plot of farmland in the entire country. It takes a lot of time, it takes a lot of resources and a lot of travel. So, we are still going to do it, but it is unlikely that we would have completed that by next year. That is why I said it is going to be two results that we would use. The preliminary number which we will use in December, which is good enough to tell you fairly what is happening and then a final number by the end of the censuses next year. That is the strategy.

 

 

 

[Daily Independent]