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.

Robot  Villager

# 1 As things stand, ...Read the full article. Posted by Robot| 12.11.2007 10:41