Nigeria’s Economic Strategy: Rebasing GDP Amidst Challenges

The Nigerian government plans to rebase its CPI and GDP by 2025, aiming to enhance economic accuracy by including the informal sector. This move seeks to boost investor confidence and revive the economy, especially as Nigeria pursues a $1 trillion GDP target. However, the challenges of high unemployment and inflation persist, indicating that mere statistical adjustments are insufficient without robust economic reforms.

The Nigerian government is set to rebase its Consumer Price Index (CPI) and Gross Domestic Product (GDP) by 2025, intending to incorporate the informal sector, which accounts for 60% of economic activities. This change aims to enhance the accuracy of economic policies and foster investor confidence as Nigeria seeks to achieve a $1 trillion GDP target. Historical rebasing in April 2014 nearly doubled Nigeria’s GDP, establishing it as Africa’s largest economy, significantly surpassing South Africa’s figures at the time. Richard Dowden from the Royal African Society noted Nigeria’s ambition to lead Africa economically, asserting that this ambition should be realized through organic growth and not merely adjustments in data methodology.

In 2023, Nigeria updated its unemployment data to encompass self-employed and casual workers, resulting in a misleading drop of the unemployment rate from 33.3% to approximately 5%. Despite this update, the nation’s actual unemployment levels are estimated to be much higher, at 45-50%. While Nigeria claims to follow global standards for GDP calculation, the economy has contracted by around 31% since 2014, warning of a potential slip to the fourth largest economy in Africa by 2024. The effectiveness of rebasing often comes under scrutiny as it tends to mask underlying economic failures unless accompanied by substantive economic reforms.

International investors prioritize sustainable growth and ease of doing business over relative GDP size or rankings, which can fluctuate due to exchange rate volatility. Therefore, reforms that stimulate private investment and open critical sectors for investment are paramount. The current administration commenced economic reforms in May 2023 by removing petrol subsidies, adjusting the foreign exchange market, and addressing electricity subsidies, but these actions have also exacerbated challenges for businesses and consumers alike. Inflation reached 33.88% in October 2024, coupled with a significant currency depreciation and a surge in food prices, leading to over 30 million people facing severe hunger.

The operational environment in Nigeria has deterred many multinational companies, driving an exit or scaling back that could stymie growth. Despite the prominent numbers reported post-2014 rebasing, the government has failed to implement the solid, long-term economic strategies necessary to support sustainable growth. There is an urgent need for a comprehensive economic framework with clear objectives and timelines that address critical issues like security, macroeconomic instability, infrastructure deficits, and regulatory challenges. To regain momentum, Nigeria must pursue rigorous reforms instead of temporary fixes, ensuring its ambitions are rooted in substantial economic growth.

Nigeria’s economic strategy is currently focused on its aim to become the largest economy in Africa, building on historical precedence set by a previous GDP rebasing in 2014. This rebasing exercise repositioned Nigeria as the continent’s economic leader by almost doubling its GDP figures, a move intended to foster investor confidence and economic resilience. However, this ambition faces significant challenges as the country grapples with high unemployment rates, a weakened currency, and escalating inflation. The government is now looking to rebase key economic indicators again, to improve policy accuracy and reflect the informal sector’s contribution to the economy, which is often overlooked in traditional economic measurements. With lessons to be learned from past experiences, emphasis on sustainable reform rather than superficial adjustments is critical for Nigeria’s economic revival and growth.

The upcoming rebasing of Nigeria’s CPI and GDP represents an opportunity to reflect the informal sector and improve economic accuracy. However, relying solely on rebasing as a method to boost GDP figures without implementing genuine economic reforms could prove to be superficial. The Nigerian government must prioritize creating a conducive environment for sustainable growth, addressing the core challenges that hinder investor confidence and economic stability. Engaging in consistent and transparent policymaking, alongside robust economic reforms, remains essential for realizing Nigeria’s goals of regional supremacy and long-term prosperity.

Original Source: punchng.com

About Sofia Nawab

Sofia Nawab is a talented feature writer known for her in-depth profiles and human-interest stories. After obtaining her journalism degree from the University of London, she honed her craft for over a decade at various top-tier publications. Sofia has a unique gift for capturing the essence of the human experience through her writing, and her work often spans cultural and social topics.

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