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The
Gross Domestic Product (GDP) is a total market value of a country’s
output of goods and services, which are exchanged for money or traded
in a market system over certain periods. It measures the value of all
economic activities within a country’s borders, irrespective of whether
the businesses are owned by locals or foreigners. Mathematically, GDP
is the sum of private consumption, investments, government expenditure,
changes in stocks, plus exports, minus imports. Unlike the Gross
National Product (GNP), which is the sum total of all the economic
activities of the citizens of a country wherever they are in the world,
GDP is closely related to the Standard of Living of the country in
question. In our own case, our GNP (gross national product) will be the
sum of the economic activities of Nigerians at home and those in the
Diaspora.
The measure of level of wealth
and prosperity at which people live is termed Standard of Living in
economics. Material items such as ownership of consumer goods or income
are considered in living standards and it is assessed by using the
average national income. This average is calculated by dividing the
Gross Domestic Product (GDP) by the population to arrive at GDP per
head. So that if the population is growing at a rate higher than GDP,
the living standards are said to be falling, and vice versa. For
comparisons with other countries, GDP is converted into a common
currency, usually the U.S. dollar. This yardstick does not give a clear
picture of living standards, particularly in an economy like
Nigeria
’s, where the gap between the poor and the rich is
almost the width of an ocean. The method also has a flaw for
comparisons, because GDP per head does not take into account the cost
of living in the country. For this reason, some economists favour the
Purchasing Power Parity (PPP) for comparisons.
The PPP takes into account how
many goods and services can be bought for the GDP per head in local
currency and it is usually expressed between 0 and 100 in parity with
the
USA
, where
USA
’s figure is 100. The differences between the GDP per
head and GDP per head in PPP can oftentimes be negligible and sometime
substantial. The Central Bank of Nigeria (CBN) is aware of the
substantial difference between
Nigeria
’s GDP per head and its GDP per head in PPP, but has
decided to mislead the nation. In a layman’s term, the junks that are
imported and the poor services available to Nigerians, with little
options for the people, have been quantified to paint a rosy picture of
a vibrant economy and a growing GDP. Besides, instead of expressing
economic growth as convention dictates in GDP,
Nigeria
has now monetised, like everything else, its GDP in
PPP as its chosen expression of its economy. The reason is simple, the
reform of the economy is not working and expressing it GDP will show a
dismal performance. The following table is what they want the people to
believe.
Year GDP (billion) naira Exchange Rate GDP (Dollars) GDP (PPP) Dollars
1995 1, 928,642 54.36 naira 35.48 billion N/A
2000 4, 676,394 102.24 naira 45.74 billion N/A
2005 14, 894,454 131.01 naira 113.69 billion 196.63 billion
2006 18, 222,800 127.50 naira 142.93 billion 240.57 billion
2007 est. 19, 589,510 125.50 naira 156.10 billion 258.61 billion
In those figures, the real GDP
underlined above is a ruse and was not published. The real GDP for 2005
was slightly above $52 billion, which was helped by the rising price of
oil. The figure for the GDP expressed in Purchasing Power Parities is
arrived at by using 75.75 naira exchange rate, in order to boost the
numerical posture of the economy. Where on earth did they get that
figure? That was the exchange rate before the dictator, General Abacha,
died. Oil and Gas still remain over 97% of
Nigeria
’s foreign earning. Unemployment is at record high –
an indication of a dismal economic performance and in variance with the
figure in PPP. The last textile mills just closed its shop, yet the
Central Bank says the economy is on track. Most factories are lock up.
Where is the growth coming from? Banking? That is merely commission
growth – increase in service sector.
The figures above are from the
CBN. If you notice from the table, there was a huge growth in GDP
between 2000 and 2005. This is irrespective of whether it was expressed
in GDP or PPP. Only a resident in Nigerian, who had been in coma since
2000, will believe those figures. Even at that, when he comes to his
senses, he will start asking questions. Where is the huge economic
activity? If you generate an extra $10 billion a year in
Nigeria
’s GDP, the whole country will shake. It would swallow
40% of the people you see loitering in the streets, during productive
hours. This huge PPP is the figure presented to the government. With
those misleading figures, the government has announced that
Nigeria
will be among the first 20 economic powers by the
year 2020. It is a realisable dream, notwithstanding. To achieve the
lofty dream, it is estimated that that magic figure will have to grow
by 13% annually and they know they are in a fix. When they are ready,
they will come out of their state of denial and know that they need a
180-degree economic policy shift. They can, if they like, continue to
express
Nigeria
’s economic figure in Purchasing Power Parities instead of the real GDP.
As things stand, due to inflation, per capita GDP today remains lower than what it was in 1960 when
Nigeria
attained independence. Close to 60 per cent of the
population lives on less than US$1 per day. In 2005 the GDP was made of
the following sectors: agriculture, 27 percent; industry, which include
light manufacturing, 49 percent; and services, 24 percent.
Nigeria
’s GDP per capita (GDP per head) actually grew by 130%
in the 1960s reaching a peak growth of 280% in the mid 1970s when Gowon
was overthrown. It was unsustainable because of indiscipline,
recklessness and mediocrity in high places. Consequently, it shrank by
70% in the 1980s. In the 1990s, diversification initiatives finally
took effect and a decade growth was restored to 10%. The Nigerian
economy is still driven by the government sector and this is the one
sector whose reformation is not even on the table for discussion. The
funding of the public sector is still largely based (80%) on the sale
of the petrodollar as an exchange for naira to the highest bidder among
the population. The informal sector that is estimated to be over 70% of
the economy evades taxation and nobody is politically bold enough to
initiate tax reform. As the second ticks away, 2020 will soon be
yesterday.
Samuel Akinyele Caulcrick, the author of The Devil Must Be Laughing.
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Posted by Robot| 12.11.2007 10:41