Nigeria’s GDP, Per Capita Income Grossly Under-estimated, Financial Expert Insists

07 Oct 2013

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Ngozi Okonjo Iweala, Finance Minister

By Nnamdi Duru

While many Nigerians attribute economic operators’ failure to realise set objectives to the fact that they base their projections on over-bloated macro-economic statistics by government agencies, a sub-regional operator has differed, saying these statistics are most times grossly under-estimated.

The Group Chief Executive Officer of Old Mutual, West Africa, Mr. Offong Ambah, made the assertion in an interview with THISDAY in Lagos over the weekend, insisting that these figures were highly conservative.

According to him, the inability of statisticians to capture most economic activities in the economy is responsible for the under-estimation of the value of the country’s Gross Domestic Product (GDP) and per capital income.

“Actually, the statistics we have from Nigeria is really misleading in the sense that it gives you a very conservative position. A lot in the economy goes unrecorded. If we take it that you are in employment and what you are being paid, you will say your household generates so much money; that is the income that is taken. They have not taken into consideration the incomes of your wife and other members of the household who are not in formal employment.

“When you are calculating the GDP, you calculate it based on formal employment and dividing that by the population of the country you will get the income per capita, which assumes a certain tax and you have disposable income. At best it is conservative,” Ambah reasoned.

Buttressing his argument further, he observed that some of the telecommunications companies operating in the country did not envisage the number of subscribers they have today, adding that the extended family system is another major source of income, which goes unrecorded in the economy.

“The MTNs in this world will tell you that because the original analysis that brought MTN into the market did not suggest they will have 52 million customers because we only had 656,000 lines in the country when MTN was bidding for its licence. So they thought that at best if they double that this will be the customer base that will be using GSM based on available statistics.  Other companies said if you divide this by that this is what they will get and what you get cannot system this market.

“My staff members are holding phones that are more expensive than their salaries, where did they get the money?; extended family. There is money in this country,” he stressed.

Ambah also reviewed prospects of Nigeria’s insurance industry viz-a-vis the renewed interest of international insurance groups in the market, saying “it is very promising. I think they are very excited about the prospects of this market with the penetration level of less than 1 per cent; my goodness.”

“We have a phenomenon capacity in this country to grow this business. The GDP is very strong, other sectors other than oil and gas are flourishing; we are going to talk about agricultural insurance very soon. The middle class is growing, not only is it growing, the people are sensitive to the fact that whatever they have accumulated they need to protect.

“The savings culture is growing, the savings culture has always been strong we are only trying to formalise that savings culture.  We have a stable macro-economic environment, interest rates are relatively low but even more is the fact that inflation rate is lower so you have a situation where real positive interest rates are good.  So people can save you don’t have to buy assets,” the Old Mutual group chief executive posited.

According to him, Old Mutual is currently operating in five continents including having a subsidiary in the country, Old Mutual Nigeria Life Assurance Company Limited. The group decided to re-channel its investments back to Africa where the potentials for return on investments are highest following the global financial meltdown.

“Old Mutual is on five continents right now. Old Mutual is in North America, in South America, Africa, Europe and Asia and in all of these markets today, following the global downturn, Africa offers the most attractive returns on investment.

“When you look at Africa, outside of North Africa, there is sub-Saharan Africa which is East and West Africa and when you take West Africa, the two countries that are really compelling the growth of this nature are Nigeria and Ghana. In the near term, their growth trajectories are quite impressive.

“Old Mutual looks at all of these and understand the fact that it has to go back to its roots for more returns has picked Nigeria and Ghana in the first instance as the markets it wants to invest,” Ambah said.

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