Economic and policy implications of GDP rebasing, By Jacob Terwase

The rebasing of Nigeria’s Gross Domestic Product (GDP), undertaken by the National Bureau of Statistics (NBS), is a transformative milestone that redefines the nation’s economic landscape. This rigorous exercise, deeply rooted in international best practices, seeks to capture the evolving structure of Nigeria’s economy while providing policymakers with more accurate tools to drive sustainable growth. With 2019 as the new base year, the rebasing process sheds light on emerging industries, recalibrates economic indicators, and sets the stage for informed decision-making across all sectors.

GDP rebasing is more than a statistical adjustment; it is an economic recalibration that speaks to the very heartbeat of a nation. This article explores what GDP rebasing entails, why it matters, and how its outcomes will shape Nigeria’s economic trajectory for years to come. At its core, GDP rebasing involves replacing an outdated base year with a more recent one to reflect economic changes over time. This process ensures that the valuation of goods and services produced within the country aligns with current realities, offering a more accurate measurement of economic activity.

The methodology behind GDP rebasing is guided by the 2008 System of National Accounts (SNA), which recommends rebasing every five years. This regular update accounts for the dynamic nature of economies, capturing shifts in consumption patterns, structural changes, and the introduction of new products and services. By recalculating constant price estimates using updated benchmarks, rebasing provides a clearer picture of economic performance. For Nigeria, this latest rebasing exercise replaces the previous base year with 2019—a year of relative economic stability, free from the disruptions caused by the global COVID-19 pandemic and subsequent economic shocks. This choice ensures that the new GDP figures are both robust and reflective of the economy’s current structure.

The decision to adopt 2019 as the base year was not arbitrary but deeply rooted in practical and methodological considerations. Unlike 2020, 2021, and 2022—years plagued by economic instability due to the pandemic—2019 was marked by stability and comprehensive data collection. Major surveys conducted during this period, such as the Nigeria Living Standard Survey (NLSS) and the National Business Sample Census, provided critical inputs for the rebasing process. Additionally, the International Monetary Fund (IMF) and other global bodies emphasize the importance of choosing a stable year for GDP rebasing. By adhering to this guidance, Nigeria has ensured that its rebased GDP figures are both credible and reflective of real economic conditions.

The NBS employed cutting-edge methodologies and international standards to ensure the accuracy and comprehensiveness of the rebasing exercise. Central to this process was the compilation of a detailed Supply and Use Table (SUT), which provided a granular breakdown of the economy across 46 industries and 217 products. This matrix served as the foundation for recalculating GDP, capturing the intricate interconnections between industries and their contributions to the overall economy.

Furthermore, the exercise was guided by globally recognized frameworks, including: System of National Accounts 2008, International Standard for Industrial Classification of Economic Activities (ISIC) 4.0, and Central Product Classification (CPC) 2.0. These standards ensured that Nigeria’s rebased GDP figures met international benchmarks, making them comparable with those of other countries. One of the most striking outcomes of the 2024 GDP rebasing is the inclusion of previously overlooked or underreported sectors. This expanded coverage paints a more detailed and accurate picture of Nigeria’s economic structure.

New areas captured in the rebasing exercise include: The Digital Economy:
Reflecting the rapid growth of e-commerce, fintech, and other digital activities; Pension Fund Administration: Accounting for the activities of pension fund administrators, which play a significant role in financial markets; Household Labor: Recognizing the contributions of domestic households as employers of labor; Modular Refineries: Capturing the outputs of small-scale petroleum refineries; Quarrying and Mining: Enhanced tracking of artisanal and small-scale mining activities; and Illegal and Hidden Activities: Estimating the economic contributions of informal and unregistered activities. By incorporating these new dimensions, the rebased GDP figures offer a more holistic view of Nigeria’s economy, highlighting the importance of emerging sectors and their potential for growth.

The implications of this rebasing exercise are far-reaching, influencing key economic indicators and shaping the policy landscape. The rebased GDP figures are expected to reveal significant changes in the size and structure of Nigeria’s economy. Emerging sectors like the digital economy may now account for a larger share of GDP, emphasizing their growing importance in driving economic growth. A larger GDP denominator will likely reduce the tax-to-GDP ratio, underscoring the need for reforms in tax administration and compliance. Policymakers must leverage this insight to broaden the tax base and enhance revenue mobilization.

With a potentially larger GDP, Nigeria’s debt-to-GDP ratio is expected to decline, improving the country’s fiscal sustainability metrics. This could enhance investor confidence and open doors to more favourable borrowing terms. Revised GDP figures will have a direct impact on per capita income calculations, offering a clearer perspective on living standards and income distribution across the country. The rebasing exercise provides valuable insights into high-growth sectors, enabling targeted policy interventions. For example, greater recognition of the digital economy could spur investments in technology and innovation, while the inclusion of informal activities could inform social protection policies.

Conducting a GDP rebasing exercise of this magnitude is no small feat. The NBS relied on extensive collaboration with ministries, departments, and agencies (MDAs), including the Central Bank of Nigeria (CBN), the Federal Ministry of
Communications and Digital Economy, and the National Pension Commission. These partnerships were critical in ensuring the accuracy and completeness of data. However, sustaining the benefits of this rebasing requires continuous investment in statistical capacity, regular updates, and transparent data dissemination. Stakeholders across government, private sector, and civil society must remain committed to using these insights for evidence-based decision-making.

The 2024 rebasing of Nigeria’s GDP is a transformative moment, redefining how the nation understands and measures its economic performance. By capturing new dimensions of economic activity and aligning with international best practices, the exercise provides a robust foundation for policymaking and planning. As Nigeria charts its economic future, the insights gained from this rebasing will play a pivotal role in fostering growth, enhancing fiscal sustainability, and improving the livelihoods of its citizens. In a rapidly evolving world, staying true to the data is not just a necessity—it is the key to unlocking the nation’s full potential.

The rebasing of Nigeria’s GDP marks a watershed moment in the nation’s economic evolution, offering a more comprehensive and accurate reflection of its diverse economic activities. By updating the base year to 2019 and incorporating emerging sectors like the digital economy, modular refineries, and household labor, the exercise showcases Nigeria’s resilience, innovation, and potential for sustained growth. This recalibration goes beyond statistics—it redefines the narrative of Nigeria’s economy, positioning it as dynamic, adaptive, and ripe with opportunities for development.

The insights gained from this rebasing exercise are invaluable for crafting policies that align with contemporary economic realities. A clearer picture of the size and structure of the economy enables policymakers to identify high-growth sectors, address structural imbalances, and implement reforms that boost revenue, reduce poverty, and enhance living standards. Moreover, the revised metrics will strengthen Nigeria’s fiscal sustainability and improve investor confidence, creating an enabling environment for both domestic and foreign investments.

As the nation embraces this new chapter, the rebasing exercise serves as a reminder of the importance of robust statistical systems in driving progress. It underscores the need for continuous investment in data collection, analysis, and dissemination to ensure that future policies remain evidence-based and impactful. With a clearer roadmap and a renewed commitment to leveraging data, Nigeria is well-positioned to harness its vast resources and unlock its full economic potential for the benefit of its citizens and the global community.

* Terwase, PhD, can be reached at: terwase20051@yahoo.com