Productivity Remains Major Concerns Despite N372.8tn Rebased GDP – Experts

Economists have noted that productivity remains a challenge in the Nigerian economy, despite the rebasing of the Gross Domestic Product, which has boosted the economy to N372.8tn.

They argued that while there has been an update to the metrics for measuring the economy, the challenges are still present, and the effects are far from transforming the lives of the everyday Nigerian.

Last Monday, the wait for the rebased GDP ended as the Nigerian Bureau of Statistics (NBS) released the data, which put the country’s new GDP at N372.8tn, or $243.7bn. The rebased GDP was premised on 2019 as the new base year, with new sectors such as e-commerce, mining/quarrying, pension funds, marine economy, culture and tourism, among others, added.

The new 2024 GDP figure is N103.51tn, or over $67bn, higher than the N269.29tn that the NBS initially reported, using the 2010 base year. This indicates that Nigeria’s economy at the end of 2024 was 38 per cent bigger than previously estimated. The latest 2024 GDP data in dollar terms showed that Nigeria remained the fourth largest economy in Africa in 2024, despite moving from the previous estimated GDP figure of $187.8bn to $243.7bn.

Speaking during a webinar organised by the Analysts Data Service and Resources Limited, the Head of Operations at ADSR, Peace Olubere, noted that the projections of the International Monetary Fund before the 2025 GDP rebasing did not provide strong indications that Nigeria would reclaim its title as the largest economy in Africa by 2030. Rather, ADSR estimates that Nigeria may remain in this position or change slightly to overtake Algeria and claim the third position on the continent, provided others also do not rebase their economies in this period.

Significantly, it was noted that while Nigeria’s economy is growing in naira terms, also amplified by the rebasing exercise, exchange rate harmonisation and depreciation are the major factors responsible for the lower GDP in dollar terms.

The rebasing exercise showed that the services sector remained the largest contributor to the GDP at a 53.09 per cent rate in 2024 as against a 52.60 per cent rate in the 2019 rebasing. This was followed by agriculture with a 25.83 per cent contribution and industries with 21.08 per cent. The fastest-growing sectors include financial and insurance services at 15.03 per cent, and transport and storage at 14.08 per cent. We have arts and entertainment and recreation at 9.63 per cent.

At the webinar organised by the Analysts Data Service and Resources Limited, the Head of Research at the Nigerian Economic Summit Group (NESG), Dr. Joseph Ogebe, flagged the low productivity in the economy despite the recorded expansion.

He said, “It is a welcome development because it aids comparability of numbers across countries. It’s also trying to capture more recent activities in the country, but the underlying concerns are still there. The underlying challenges are still there, and I think that’s where our eyes should be. One of these concerns is productivity challenges. Productivity remains a concern. Even with the revised numbers, we can see that agriculture and services have increased and why industry dropped a little, but if you do a small check, you’ll see that the sectors with the largest contributions, agriculture and the like, have the lowest productivity.

“When you pick Nigeria and benchmark her with other countries in terms of productivity, you will see that we are doing, like, less than two. Countries like South Africa and Brazil are doing twice what we’re doing.

“So, it’s not just having a big number. It’s not just having a robust number, right? So, the productivity is very, very important across the sector. Another major concern is that some of these sectors that we’re applauding that they’ve actually expanded, like agriculture and services and the like, right, their contribution to export earnings, right, still remains low or weak, right? So, we are not competitive. We are not competitive. Our products, including manufacturing, agricultural products, and the like, are not competitive. These things are very important for us to get FX inflows into the country.”

Ogebe asserted that if Nigeria is to achieve a $1tn economy by the end of the decade, then the issue of productivity must be addressed.

“If we want to get a trillion-dollar economy, the FX rate is a big drag, right? So, if we’re to achieve that trillion-dollar economy, we should look for more systematic and strategic, you know, ways to actually boost productivity and also boost export competition so that we can get more inflows, and we can use this to buffer our exchange rate,” he averred.

The President of the Nigerian Economic Society, Professor Adeola Adenikinju, concurred on the low productivity in the economy, which he traced to what he called a jump from an agricultural economy to a service economy without an industrial base.

He described it as a case of “abnormal growth,” a path where Nigeria has “jumped” from a primary agricultural economy to a service-dominated one, resulting in a “stunted manufacturing sector.” This trend, particularly evident in the 2014 and 2025 rebasing exercises, shows agriculture and services rising while industry declines, which “does not fully align with structural transformation principles” that typically see industrial contribution rising first.

Adenikinju said, “When you look at this rebasing that was done, among the sectors that have contracted are manufacturing and construction, and these are very important sectors. There is no way for a large economy like Nigeria to develop without a strong industrial base, and I mean manufacturing. You need it for employment; you need it to be able to generate the high income that will take you out of poverty. The services you have and the agriculture you have are low productivity and low income-based. They are highly driven by informal sectors.

“So that you have this high incidence of poverty, high inequality in the system, these gender imbalances, and the rest of it, because the sectors are not for growth. The growth sectors are not following the proper phases of development, and something has to be done about that.”

In the oil and gas sector, Adenikinju maintained that despite its contribution to the GDP, it should not be celebrated, as it could do so much more.

“The oil sector that is contributing four per cent, again, should not be celebrated. The oil sector has so much potential. If we put oil and gas in, it can do a whole lot to drive the economy. There is so much horizontal integration that could take place in that sector.”

The Chief Economist, Deloitte West Africa, Damilola Akinbami, highlighted the need to remove the roadblocks to the formalisation of businesses in Nigeria, saying a ‘hustle economy’ wasn’t doing much for Nigeria in terms of revenue generation.

She said, “For the scale or size of this country, if you have an informal economy that contributes at least 43 per cent of GDP, that is a lot because from a revenue calculation or competition or generation point of view, when we’re looking at taxes and whatnot, imagine if you could reduce that number by half to about 20 per cent or even 10 per cent. You can imagine the implications or the impact of that on revenue generation from even a tax point of view. We still have a large informal sector.

“The government, I mean, in the past and even right now, has put in place a number of initiatives to try and formalise the informal economy, but there’s still more to be done. The private sector, too, is doing its part, but there are still structural issues preventing the informal sector from coming into the formal sector.”

Akinbami said that from the tax system to registering a business, some players in the informal sector may prefer to remain informal to avoid dealing with the challenges of formalisation. She added that the use of technology to create simple solutions would go a long way.

Meanwhile, the analysts at Afrinvest provided a breakdown of the implications of the rebased GDP and said that the decline below the prudential benchmark of the nation’s debt-to-GDP could embolden the government to take on more borrowings.

“In terms of the implication of the GDP rebasing exercise on fiscal status, the nation’s debt-to-GDP ratio for 2024 improved to 40.0 per cent from 53.8 per cent under the previous base year. By annualising the Q1:2025 GDP size (N376.4tn), the debt-to-GDP ratio is now 39.7 per cent, below the prudential threshold of 40.0 per cent set by the Debt Management Office in its sustainable debt framework.

“This development has given the FG fresh headroom to take some more borrowing to bridge fiscal shortfalls without breaching the prudential ceiling. Likewise, the tax revenue to GDP rate, which previously was estimated at 13.5 per cent, has now dropped to 10.0 per cent. We see this providing the necessary impetus for the aggressive implementation of the newly signed Tax Reform Act 2025 when it becomes operational in 2026,” said the analysts in their weekly report.

The investment firm retained its GDP growth forecast of 3.3 per cent for 2025, anchored on sustained resilience in the services sector. It expects a moderate recovery in the agricultural sector, supported by the onset of the harvest season. Nevertheless, several downside risks could constrain overall performance, including persistent structural issues such as insecurity in key agrarian regions, elevated inflation eroding consumer spending, and tight monetary conditions restricting credit availability.

SOURCE: The PUNCH