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A call for data integrity in Nigeria’s policymaking and governance 15 Oct 2024

In recent years, Nigeria has grappled with significant economic challenges. The country's growth has been sluggish, and inflation remains stubbornly high. The economy has continued to struggle with its dependence on oil exports, with the country facing challenges on both supply and demand sides for the commodity.

As Nigeria seeks to chart a course towards economic recovery and sustainable development, the critical roles of effective governance and data-driven decision-making cannot be overstated. The latter is a critical factor in achieving the former. The right data can illuminate the true state of the economy, highlight areas most in need of intervention, and help policymakers assess the impact of their decisions. However, relying on flawed or incomplete data can lead to misguided policies that fail to address the root causes of economic challenges or even exacerbate existing problems.

The outcomes of using appropriate versus inappropriate statistics in economic governance can be starkly different. For instance, employing a multidimensional poverty index that accounts for factors like education, health, and living standards can provide a better understanding of poverty than relying solely on income-based metrics. This approach could lead to more targeted and effective poverty reduction strategies. Similarly, accurate core inflation rates can help the central bank make more appropriate monetary policy decisions, potentially leading to better control of inflationary pressures without unnecessarily constraining economic growth. Concerning employment, careful consideration of data related to formal and informal sector employment and underemployment rates can provide a more accurate picture of the labour market than official unemployment figures alone, helping to shape the policies for more effective job creation and skills development.

Even in the most advanced societies, the path to data transparency and effective governance is often fraught with challenges. When governments and citizens are not committed to facing difficult realities, the interpretation and use of statistics can become a contentious issue. This tension arises from the complex interplay between data, policy, and public opinion.

In an ideal world, statistics would serve as an impartial foundation for decision-making, providing clear insights into societal issues and guiding effective solutions. However, the reality is often more complicated. As the stakes in policy debates rise and the pressure to demonstrate success intensifies, there is a growing trend that threatens to undermine the very purpose of statistical analysis in governance.

This trend manifests in two particularly concerning ways. First, there is an increasing tendency to manipulate or selectively interpret data to support predetermined conclusions or political agendas. Second, there is a propensity to overlook or downplay statistics that do not align with desired narratives or policy directions. Both approaches can severely compromise the integrity of public discourse and the effectiveness of governance.

These practices have given rise to what some observers call "statistical torture" – the process of twisting data until it yields the desired result, regardless of its original meaning or context. Simultaneously, we are also witnessing a troubling pattern of ignoring valuable statistical insights simply because they do not fit preconceived notions or popular sentiments.

This manipulation and selective use of statistics can lead to misguided policies, erode public trust in institutions, and ultimately hinder a country's ability to address its most pressing challenges. In Nigeria's case, recent economic data has come under scrutiny, raising questions about its authenticity and reliability. The latest economic presentation to the Lagos Business School by Financial Derivatives’s CEO, Bismarck Rewane, sheds light on this issue, highlighting discrepancies between official statistics and on-the-ground realities.

According to Rewane's presentation, Nigeria's economy shows some positive trends in official data. The Gross Domestic Product (GDP) growth increased from 2.98% in Q1 2024 to 3.19% in Q2 2024. Average oil production rose from 1.28 million barrels per day (mbpd) in June 2024 to 1.31 mbpd in July 2024. The Purchasing Managers' Index (PMI) improved from 49.2 to 49.9, approaching the expansion threshold of 50. Inflation reportedly decreased from 34.19% in June 2024 to 33.4% in July 2024. External reserves increased from $35.77 billion to $36.31 billion.

However, these positive indicators contrast sharply with the economic realities experienced by many Nigerians. The presentation points out that if these numbers truly reflected the economic situation, we would expect to see a strengthening exchange rate, reduced cost of living, declining product prices, and an end to fuel queues. Yet, these improvements are not evident in daily life.

Several factors contribute to the unreliability of Nigerian economic data, including outdated methodologies, limited data collection capabilities, potential political influence, the challenge of measuring the informal economy, and time lags in data reporting. The use of potentially flawed or misleading economic data can have far-reaching consequences for Nigeria's development and policy-making, leading to misguided policy decisions, misdirected resource allocation, loss of investor confidence, ineffective poverty reduction strategies, hampered economic planning, and reduced public trust.

Recent administrations in Nigeria have often shown a reluctance to fully embrace data transparency and accurate representation of economic realities. This attitude manifests in selective reporting, delayed data release, lack of transparency, resistance to external audits, deliberate underfunding, and politicisation of economic data. This approach to economic data potentially leads to policy ineffectiveness, reduced international credibility, missed opportunities for reform, and a widening trust gap between the government and citizens.

Several steps can be taken to address these challenges and improve the reliability of Nigeria's economic data. These include modernising data collection methods, enhancing institutional independence, increasing transparency, collaborating with international organisations, investing in capacity building, and encouraging independent analysis.

A government's and its citizens' willingness to confront and acknowledge unpleasant data is crucial for effective problem-solving and national progress. When a society can openly discuss its challenges, it creates an environment conducive to finding real solutions. Acknowledging uncomfortable truths allows for a more accurate assessment of the situation at hand. It provides a solid foundation for policy-making, ensuring that resources are allocated where they are most needed. Moreover, it empowers citizens with the information they need to participate meaningfully in the democratic process and hold their leaders accountable.

Removing the stigma associated with admitting to problems or shortcomings requires a cultural shift in governance and public discourse. It involves reframing the acknowledgement of challenges as a sign of strength and responsible leadership rather than weakness. Governments that openly address difficulties and involve citizens in finding solutions often gain more respect and support from their constituents. As Nigeria continues to navigate its economic challenges, embracing data integrity and transparency will be crucial in paving the way for sustainable growth and development.

As the country stands at a critical economic crossroads, the path forward demands a fundamental shift in approach to governance, data integrity, and effective policy implementation. Nigeria's economic future hinges on its ability to embrace transparency, leverage accurate data, and implement reforms that address the root causes of its persistent economic challenges. The country's position as a major oil producer with a large, young population presents not only immense potential but also significant complexities because of the sociopolitical factors that have driven its economic underperformance for decades.

Nigeria's economic challenges and the outcomes of its efforts to overcome them will have implications that extend far beyond its borders. As a key player in West Africa and a significant emerging market, Nigeria's success or failure in addressing its economic issues will impact regional stability and influence global perceptions of and reactions to African economic potential.

Cheta Nwanze is Lead Partner at SBM Intelligence.