The Nation Newspaper

Tag: Rebasing

  • GDP rebasing may lead to more borrowing

    GDP rebasing may lead to more borrowing

    Chief Economist, Renaissance Capital (RenCap), Charles Robertson has said that Federal Government’s rebasing of the Gross Domestic Product (GDP) could raise this year’s budget deficit by N400 billion to N1.9 trillion. The economist said the GDP revision may affect the 2014 budget too. “It does nothing to improve budget revenues or expenditure. It does mean, however, that a nominal federal government budget deficit of N912 billion could be raised by about N400 billion to N1.3 trillion and still remain at 1.9 per cent of GDP, using the new 2014 GDP estimate we have. This may be very tempting to politicians in pre-election mode,” he said.

    Robertson said the wider budget deficit would then require additional borrowing, via either Eurobonds which Nigeria’s debt office is trying to move towards, or domestic debt. Higher supply might offset the benefit to debt holders of the improved debt ratios and a possible rating upgrade.

    Robertson said the GDP re-basing could cut the public debt ratio from 20 per cent of GDP to 13 per cent, and cut public external debt below two per cent of GDP, while the current account surplus may still be five per cent of GDP. “We suspect the rebasing is supportive of a possible upgrade in Nigeria’s Ba3/BB- ratings over 2014 to 15,” he said.

    Analysts said banks’ chief economists, strategists and business development officers will in the coming weeks be reviewing lenders’ operational directions to align with the new growth areas in the rebased GDP.

    Former Director, Keystone Bank, Richard Obire said the new GDP will challenge banks to identify which sectors of the economy needs more credit. He said: “Credits will flow to areas of strength. The rebasing has brought out the components of each sector of the economy, including their strengths, weaknesses threats and opportunities and banks have to explore them”. Head of Africa Research at Standard Chartered Bank, London, Razia Khan said in a report that the impact of dramatic growth in telecoms, banking and entertainment, especially music and the Nollywood film industry might have been downplayed in the previous GDP figure. She said rebasing will reposition the economy and bring out the full potential of each sector.

  • Rebasing to boost economy’s size by 60%

    Nigeria’s plan to rebase its gross domestic production figures next year may boost the assessment of the size of its economy by as much as 60 per cent, leapfrogging South Africa as the continent’s largest nation in terms of total wealth, Renaissance Capital (RenCap), an investment and research firm, has said.

    According to a Bloomberg report, Nigeria may see its economy measured at between $384 billion and $424 billion in 2014, according to projections by Charles Robertson, the London-based global chief economist at RenCap, in an e-mailed note to clients yesterday. That would compare to about $370 billion for South Africa’s economy, he added.

    Nigeria is updating its GDP base year to 2010 to give a better indication of the size and composition of its economy. The GDP of Africa’s most populous nation is currently based on production patterns in 1990. The schedule for release of the new GDP data has been delayed several times this year with the figure set to be published by the country’s National Bureau of Statistics (NBS) in February.

    “The effect could be dramatic because a national census of business has not been done for 20 years. We expect a big rise in the number of businesses that the NBS can measure,” said Robertson.

    The data may mean that Nigeria’s growth rate may slow to five per cent to six per cent, from a current seven per cent annual rate, he added. Even a revised per capita GDP from $1,700 to an estimated $2,400 will lag behind South Africa’s at $6,800, according to Robertson. Nigeria has about 170 million people while South Africa has a population of 53 million.

    Coordinating Minister of the Econonmy and Finance Minister, Ngozi Okonjo-Iweala said last month that Nigeria’s economic growth over the past decade has not been inclusive enough and has fostered inequality.

    Robertson said: “This will not be easy to explain to the population. Rebasing does not mean Nigerians are better off – it just means they are better off than official statistics previously indicated.”

    South Africa is the site of Africa’s biggest stock and exchanges and its electricity generation capacity is ten times that of Nigeria.