The National Bureau of Statistics (NBS) has stirred controversy with its bold decision to include illicit activities such as prostitution and drug trafficking in the calculation of Nigeria’s Gross Domestic Product (GDP). This move, announced during a sensitization workshop held on January 9, 2025, aims to reflect a more accurate picture of the country’s economic standing by factoring in previously overlooked sectors.
NBS’s redefinition of Nigeria’s GDP includes illegal industries, alongside new segments like the digital economy, modular refineries, and even pension fund administrators. The inclusion of these often-hidden activities in national accounting marks a significant shift in how economic growth is measured in Nigeria.
Economic Realities and Hidden Activities
The decision to incorporate underground and illicit markets into GDP calculations is aligned with global best practices, according to NBS officials. Dr. Baba Madu, Head of National Accounts at NBS, clarified that activities like drug trafficking and prostitution, though illegal in Nigeria, are recognized in other economies worldwide, driving substantial income in some countries.
“If you are into, for instance, drugs, there are some countries where the drug trade drives their economy. It is illegal here because there is no legal backing. Also, prostitution earns income. Some even live better than those in the formal sector,” Madu remarked during the workshop. “The challenge is the legal backing and how do we gather accurate data. These sectors contribute significantly, but they remain underreported due to their hidden nature.”
Madu acknowledged the difficulty of measuring these activities accurately, citing the common practice of individuals underreporting their income or engaging in illicit trades covertly. However, despite the challenges, he assured that these activities form a small fraction of the overall economy, with estimates suggesting they contribute less than 3.5% to the nation’s GDP.
The inclusion of illegal sectors is part of a broader initiative by the NBS to rebase Nigeria’s GDP and Consumer Price Index (CPI) to better reflect the current state of the economy. The rebasing exercise is considered a vital tool for policymakers to assess economic performance and identify growth opportunities in real-time.
Why 2019? Why Now?
In addition to the inclusion of hidden activities, the NBS has proposed 2019 as the new base year for GDP calculations, superseding previous years’ base periods. According to NBS, 2019 marked a period of economic stability before the global disruption caused by COVID-19 and fluctuating policy changes.
The decision to use 2019 as the benchmark reflects a desire to build the nation’s economic statistics on solid, pre-pandemic data. This is expected to provide a clearer and more accurate picture of Nigeria’s economic trajectory. “We chose 2019 because it was a stable year in the economy,” explained Dr. Madu. “It provides a better point of reference before the impact of the pandemic and the major policy shifts that followed.”
Alongside the GDP rebasing, the NBS has proposed the year 2024 as the new base year for calculating inflation, a move that will better align inflation metrics with contemporary economic realities. This update is expected to offer a more nuanced understanding of price changes in the Nigerian market, providing both the government and businesses with better data for decision-making.
A Shift in Economic Measurement: The Bigger Picture
While the idea of including illicit activities in economic metrics may be shocking to many, experts argue that it’s a necessary step to understand the full scope of Nigeria’s economy. Dr. Tayo Aduloju, Chief Executive Officer of the Nigerian Economic Summit Group (NESG), highlighted the potential benefits of the GDP rebasing during his welcome address at the workshop.
“Accurate data enhances credibility,” Aduloju stated. “Our debt-to-GDP ratio, a critical indicator of fiscal health, dropped from 19% to 11% after the 2014 rebasing. This improved Nigeria’s creditworthiness, making us a more attractive destination for foreign direct investment.”
Aduloju emphasized that the exercise would sharpen the government’s ability to make informed policy decisions, allowing for better allocation of resources and targeted economic interventions. By identifying sectors with high growth potential and those that require more support, the rebasing exercise would pave the way for more effective governance.
The rebasing of GDP, which could provide a detailed map of the Nigerian economy, is expected to be a game-changer in terms of foreign investment and international economic standing. As Aduloju pointed out, countries like Ghana have seen significant improvements in their economic outlook after similar exercises. “For example, after Ghana’s 2010 rebasing—which resulted in a 60% GDP increase—its policymakers could better plan for infrastructure and social investments, fueling sustained growth,” he said.
Implications for Policy and Governance
The integration of illegal and informal sectors into the GDP is not just a statistical exercise. It has deep implications for Nigeria’s policy landscape. Policymakers will need to grapple with the moral and legal challenges of recognizing illegal activities as part of the economy, while also ensuring that the data is collected and utilized effectively.
Prince Adeyemi Adeniran, the Statistician General of Nigeria, reiterated the importance of rebasing in his remarks. “The rebasing is a vital exercise that ensures our economic indicators are current and accurate reflections of the economic realities on the ground,” Adeniran explained. “As economies evolve, new industries emerge, and consumption patterns shift, it becomes imperative to update our statistical measures to capture these changes.”
The rebasing will not only provide an updated economic snapshot but will also lay the groundwork for better economic policymaking, which is crucial for Nigeria as it navigates the complexities of post-pandemic recovery.
The Road Ahead
As the NBS moves forward with its plans to incorporate hidden activities into GDP calculations, the debate on the ethics and accuracy of such measurements is likely to intensify. Critics argue that this could normalize illegal activities, while supporters claim it offers a more comprehensive view of the economy’s true size and scope.
