Rebasing or mainstreaming immorality?
The recent announcement by the National Bureau of Statistics (NBS) to include illegal activities such as prostitution and drug peddling in Nigeria’s Gross Domestic Product (GDP) calculation has sparked widespread debate, raising ethical, social, and economic questions. The NBS described the move as aligning with international best practices under the System of National Accounts (SNA) […]
The recent announcement by the National Bureau of Statistics (NBS) to include illegal activities such as prostitution and drug peddling in Nigeria’s Gross Domestic Product (GDP) calculation has sparked widespread debate, raising ethical, social, and economic questions.
The NBS described the move as aligning with international best practices under the System of National Accounts (SNA) 2008.
This inclusion is not unique to Nigeria. Countries like the United Kingdom, Canada, and Italy have incorporated similar calculations into their GDP.
Prostitution is illegal in Nigeria. It is a practice condemned by cultural, religious, and moral norms across the country.
Expert have therefore argued that, in a society where morality and legality often clash with economic pragmatism, the implications of such a move warrant deeper scrutiny as it has raised the question of whether prostitution is an economic activity or a social III?
Isaac Asabor in his intervention said: “Including prostitution in GDP calculations seemingly acknowledges its existence as an economic activity.
“The NBS has argued that the inclusion is purely statistical and does not equate to legal acceptance.
“Yet, the line between recognition and legitimization is thin. By quantifying the economic contributions of prostitution, the government indirectly assigns value to an activity it deems illegal.”
Asabor argued that countries that include prostitution and other illegal activities in their GDP often have robust legal and regulatory frameworks to address these sectors. “For instance, in the Netherlands, where prostitution is legal and regulated, its inclusion in GDP aligns with national policy.
“In contrast, Nigeria’s inclusion of prostitution and drug peddling occurs in a legal vacuum. These activities remain criminalised, unregulated and stigmatised, creating a stark dissonance between economic accounting and governance.”
Asabor said another critical issue is the reliability of data. How does the NBS intend to measure the economic contributions of illegal activities accurately? Prostitution and drug peddling operate in secrecy, making data collection fraught with challenges. Estimates are likely to rely on assumptions and proxies, raising questions about their accuracy and credibility. Additionally, including such activities in GDP calculations could incentivize further illicit behaviour, as individuals and groups may exploit the statistical acknowledgment for personal gain.
Also speaking on the move, renowned capital market professor at Nasarawa State University, Prof. Uche Uwaleke, cautioned that such a move could legitimise these activities, setting a worrying precedent in economic reporting.
Uwaleke said: “I don’t think it would be a good decision for us to include those activities. No single country in Africa does this, and including them tends to legitimise these actions.”
On the importance of GDP rebasing, Prof. Uwaleke remarked, “It’s a good thing they are continuing with the engagement because it’s very important for the public to be aware of what they are doing. At the end of the day, whatever comes out should be generally accepted by the public.”
He emphasised the critical role GDP data plays in economic planning noting that the government including those targets in the annual budget. Adding that Investors are also conscious about what inflation figures are.”
Explaining the significance of GDP rebasing for the average Nigerian, he said, “These numbers are very important to the ordinary Nigerian. With the rebasing, we expect the numbers to be larger this time, and if the GDP eventually comes out larger, it would mean that some of the metrics and ratios benchmarked to GDP would improve. For example, the debt-to-GDP ratio—we expect that to improve. Every metric that has GDP as the denominator will benefit.”
He added that “There are people who view the size of the GDP favourably—investors, creditors, and others. The central bank also relies on inflation data to brainstorm policies. High interest rates impact the economy, and this is something that cannot be ignored.”
While supporting other aspects of the rebasing process, he noted that, “The inclusion of the digital economy, modular refineries, pension fund activities and national insurance are very good steps. But for illegal activities, I think we should not include them.”
He praised efforts to expand the Consumer Price Index (CPI) basket and modernise classifications saying, “I’m happy the basket is being expanded from 740 to 960 items for CPI computation. I’m also happy they now want to digitise the process and migrate from the initial 1999 divisional classifications to the 2018 version. Additionally, reducing the weight of food in the computation is a positive step, as this is where the pressure lies.”
Experts have also argued that the move risks alienating foreign investors with strict ethical guidelines.
Companies and institutions may hesitate to engage with a country that economically recognises illegal activities, fearing reputational risks, adding that this could undermine the very goal of enhancing Nigeria’s attractiveness as an investment destination.
What the NBS wants to do
In its latest release, the NBS announced that 2019 would serve as the new base year for its CPI rebasing exercise.
This decision was influenced by the economic distortions caused by the COVID-19 pandemic in 2020 and 2021, as well as the uncertainty and instability of 2022–2024.
Under the new framework, the NBS has adjusted the weights applied to various sub-indexes, reflecting changes in consumer spending patterns.
While the sub-index items remain largely unchanged, the NBS introduced “Insurance and Financial Services” as a new sub-index.
The most notable changes include a sharp reduction in the weighting of Food & Non-Alcoholic Beverages from 51.8% to 40.1% and a significant increase in the weighting of Restaurant & Hotels from 1.2% to 12.9%.
What this means
For instance, the reduced weighting for Food & Non-Alcoholic Beverages from 51.8% to 40.1% tempers its impact, while the increased weighting for Restaurants & Hotels (from 1.2% to 12.9%) amplifies the contribution of hospitality services.
Additionally, other sectors with increased weightings, such as Transport (6.5% to 10.7%), Health (3.0% to 6.1%), and Communication (0.7% to 3.3%), now play a much larger role.
This recalibration makes the inflation rate more sensitive to price changes in these service-based sectors.
For example, fluctuations in fuel prices will now have a greater impact on overall inflation due to the higher weighting for transport. Similarly, rising medical costs and telecom tariffs will reflect more prominently in inflation data.
These changes highlight the evolving spending patterns of Nigerian households, as services like healthcare, education, and communication become more integral to their budgets.