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Showing posts from April, 2014

Nigeria’s “Rebased” Economy: Meaning and Areas of Concern

Nigeria now proudly wears the crown of Africa’s largest economy; knocking South Africa off a perch it has always occupied. With its “rebased” gross domestic product (GDP), the country’s total economic output for 2013 ballooned by 89% to $510 billion; easily surpassing South Africa’s GDP of $380 billion, and making it the 26th largest economy in the world. Nigeria’s GDP before rebasing was about $270 billion. What are we to make of Nigeria’s newly rebased economy? From my observations, there are two serious areas of concern illuminated by the rebased GDP? First, let me explain what is meant by “rebasing”, why Nigeria has decided to rebase its GDP now, and what the positives and negatives are of the new GDP.
What is “Rebasing”?
Real GDP (i.e. inflation-adjusted GDP) is evaluated using the market prices of a reference/base year to mitigate the distorting effects of inflation. This is because by having a constant price during calculations, policymakers and analysts can more accurately tell…