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The Statistician General of the Federation and Chief Executive, National Bureau of Statistics (NBS), Mr. Yemi Kale Tuesday said the structure of the services sector of the economy which constitutes over 50 per cent of nominal Gross Domestic Product (GDP) does not benefit the country in terms of job creation but rather enriches other countries from which services are being imported.
Speaking in Abuja on the “Rebased GDP-Understanding the Statistics,” at the 2014 Securities and Exchange Commission’s (SEC’s) Learning Series themed: "The Rebased GDP and its Impact on the Nigerian Capital Market," Kale said the services industry merely import and consume services without a counter output, a situation which he said partly explains why the impact of the recently rebased GDP could not be evaluated through job creation and better living condition.
He also said the fact that only a few individuals, companies and sectors continue to be accountable for the larger GDP output would always ensure that the country grows without a proper income distribution and job opportunities.
He said there was need to bring some of the sectors and companies which contributed significantly to GDP growth to the capital market so as to ensure income redistribution.
However, he stressed that the rebasing of GDP was not expected to fulfill monetary expectations by individual, but rather give policy makers direction to formulate policies that could impact on living standards.
Contrary to assumptions, he said GDP growth is no guarantee for development and job creation.
He said: "The growth in GDP is not synonymous with job creation. It is expected that as the economy grows, people’s income rise and their demand for goods and services increase. As a result, producers increase output and employ more people so that employment increases.
"However, though jobs are being created, the jobs may not enough to reduce unemployment or poverty. This is the challenge of non-inclusive growth, which occurs when an economy that is greatly endowed with human labour (population) actually employs more capital-intensive production processes rather than labour."
Continuing, he said: "In fact, developing countries have been known to have higher and faster GDP growth rates than developed countries. The fact that a country has a higher nominal GDP than the other does not in itself suggest that one country is ‘more developed’ than the other, since development encompasses a broader set of measures of human progress than GDP, which is strictly a measure of economic output.
“However, GDP (or output) growth is necessary for development. When output rises, producer profits increase, government tax and revenue rise and, if deployed appropriately to building physical or social infrastructure, one can expect to witness tangible development progress."
Continuing, the NBS boss said:"Where this link is not maintained however, it is difficult for growth to translate to meaningful development progress, whether in terms of physical infrastructure or progress with social indicators.
“Rebasing the GDP is an exercise which brings the comparison of current GDP estimates to the closest picture of reality as possible. By measuring better the level of economic activity, GDP rebasing provides a more accurate picture of the economy which is crucial to informing policy makers on the current economic trends.
“This helps in the formulation of more- informed policies to address poverty, unemployment and human development challenges."
Also speaking at the occasion, the Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane said although the World Bank had suggested borrowing domestically rather than outside, the Nigerian stock market needs to sustain investor confidence after the recent financial crisis.
He said efforts should be made to ensure the capital market reflect the economy because most of the remarkable GDP growth results do not come from listed companies.
He added that getting more companies to list could contact the income inequality in society as well as reduce social vices.
Speaking on the 'Nigerian Economic Outlook' he said the country must choose an appropriate and sustainable strategy for growth.
Bismarck also said the country needed to move from a bank- based economy to market based system, arguing that the latter is more effective for development purposes.
On the macroeconomic front, he said there had been excess liquidation in the system adding that this could increase the pressure on the currency.
He also said the Central Bank of Nigeria (CBN) would soon accept the reality of Naira devaluation earlier than anticipated while excess liquidity in the system may become a real problem.
He said the higher amount of money shared at the monthly Federation Account Allocation Committee (FAAC) meetings despite shortfall in oil revenue was not in the best interest of the country because it meant reserves and other savings were being depleted to make up for the shortages.