NIGERIA should have got it right the last time it rebased its economy but failed to follow some preconditions, a development economist, Kazeem Bello, said.

Bello shared his thoughts with The ICIR on the backdrop of President Bola Tinubu’s declaration that Nigeria would rebate its economy to $1 trillion by 2026 and possibly grow it further to $3 trillion by the end of 2033.

Tunibu said this on Monday, October 23, at the opening ceremony of the 29th Nigerian Economic Summit (NES 29) in Abuja.

“A $1 trillion economy is possible by the year 2026 and a $3 trillion economy is possible within this decade. We can do it.”

“We’ve done double-digit inclusive and sustainable competitive growth. This is our agenda and I’d like to charge you – the captains of industry here present, to commit yourselves to and redouble your effort to our vision of a renewed hope,” Tinubu said.

Sharing his thoughts, Bello, the chief executive officer/principal partner with Afrique Capital and Equity Funds Limited, said the current administration could get it right if it captured a significant part of the informal sectors; otherwise, it would repeat the ‘mistake’ of the Goodluck Jonathan’s administration.

He said that the country hurriedly rebased its economy under Jonathan despite the International Monetary Fund and World Bank’s advice on the prerequisites for such an important economic exercise.  

The Nigerian economy grew to $550 billion in gross domestic product (GDP) from about $360 billion immediately after the rebasement, putting the country’s economy ahead of South Africa in becoming Africa’s largest economy.

“But what did the country gain in actual economic performance since then,” Bello queried.

The GDP numbers slid down over the years and now gross at about $440 billion, he said. “That obviously connotes a lot of implications and clearly shows that the rebasement may have been wrongly carried out.” 

Over time, the poverty level has increased with multi-dimensional poverty numbers grossing to over half of the population, unemployment rising, inflation becoming stubborn to tame, the wage system stagnant, and the price level rising to the roof.

Bello hoped the Tinubu government would avoid making the mistake again; “otherwise, rebasing the economy would end up with a declining GDP by 2033.”

Data mining

There is a need to work on a solid data mining and retention system that will assist in capturing a significant part of the informal sectors currently with no data information, Bello said, suggesting that the government should figure out how to acquire the necessary technology to capture a significant number of the informal group.

“This was a major reason why the economy moved from a rebasement of $550 billion in 2013 to a reduction of $440 billion as of today,” he asserted.

Effective tax system

Bello suggested that the government must work on installing effective tax capturing and incentive mechanisms that would assist in increasing the records of tax payments and encourage the informal sectors.

Aside from the value-added tax, the informal sectors are not seen to contribute to the tax system because of the lack of tax administration, noting that one of the barometers for estimating GDP remains the tax revenue system.

“A situation where almost 70 per cent of the production ecosystem does not get taxed appropriately is a window for losing so much in the GDP numbers,” he stressed.

Foreign exchange reform

According to Bello, Central Bank must carry out tailored reforms of the foreign exchange market that will see some stability in the market for a sustainable long period.

He asserted that the falling value of the naira was one of the primary reasons the last rebasement exercise was defective.

“When the rebasement was carried out in 2013, the Naira exchanged for N165 to one dollar. Today, the parallel market rate is floating around N1,150.

“Assuming the economy is rebased today at $1.0 trillion and in the next two years the naira sees continuous depreciation and settles at N1,800, it means that the present value of the GDP of $1.0 trillion in two years shall be decimated to $555 billion,” he explained.

Investment in infrastructure

Bello continued that the government should invest in infrastructures to support informal sector growth, which is why the sector must be taxed appropriately.

Other suggestions include the government’s ability to reduce agriculture production waste that sees Nigeria losing over $50 billion annually due to poor infrastructure, lack of storage facilities and processing capacity.

Bello submitted that Nigeria could attempt another rebasement exercise to harness the economic opportunities required to generate real increases in the GDP numbers, considering many of these steps.