Playing Maradona with Statistics

Playing Maradona with Statistics

Jideofor Adibe, PhD, LLM

In his highly regarded book, Lying With Statistics (1954) the American writer, Darrell Huff, discusses the funny business of lying with figures, telling us how intentional or unintentional errors could lead to inaccurate conclusions. Though Huff was not a statistician, his book, which he had meant to be a witty introduction to statistics for the general reader, quickly became one of the most widely read statistics books in history.

When in late June 2011 several newspapers and weblogs reported that a research note from Morgan Stanley has suggested that Nigeria’s economy could overtake South Africa’s economy (currently about four times the size of Nigeria’s) by 2025, I remembered Darrell Huff’s book. According to the reports, two of Morgan Stanley’s Johannesburg-based economists, Andrea Masia and Michael Kafe, wrote in a report that was released on June 29 2011 that “Nigeria could match SA’s gross domestic product (GDP) of $400bn before the end of the decade and overtake SA by 2025”. The report further claimed that the “Nigerian economy is on a growth charge”, buoyed by “retail trade, deepening financial markets, and current account surplus”.

There are several issues with this report:

One, I do not consider myself a killjoy. As a proud Nigerian I would love this projection to come to pass. I can imagine the number of Nigerians that have already acquired an extra swagger because of that report. I do not intend to spoil their fun. But we have to be realistic. Every projection of this nature is based on certain assumptions (the ‘all things being equal’ clause). Once the assumptions are changed, the conclusions also change. The basic assumption in the Morgan Stanley’s analysis is that Nigeria’s GDP would grow by 8.4 percent this year and 8.5 per cent next year while South Africa’s would grow by 3.6 per cent this year and 3.9 per cent next year. Because in real life ‘all things are rarely equal’, these assumptions could easily, and in fact are likely to be wrong. For instance any major event such as earthquake, terrorist attack, sharp economic meltdown or the discovery of alternative sources of fuel in China or USA (the two main importers of the country’s crude) would fundamentally alter this assumption as it would sharply reduce Nigeria’s revenue from oil. In the same vein a prolonged resurgence of insecurity in the Niger Delta or a sudden collapse in oil prices in the international oil markets will also mean that the growth assumption for the country will have to be sharply revised downwards because revenues would dip sharply. Add to this the monocultural nature of our economy which is characterised by policy reversals and instability amid one of the worst crises of nation-building in our history, and you will find how difficult it is to sustain this growth rate – assuming it is ever achieved in the first place. There is also a ridiculous assumption that South Africa will be incapable of accelerating the growth of its economy or that by surpassing the size of South Africa’s economy Nigeria will automatically surpass the country in economic development or move ahead of South Africa in the Human Development Index. One of the things about lying with figures is that because you are speaking with the ‘specificities of a statistician’, it makes you appear cleverer than you really are before your uninitiated audience.

Two, while I recognise that Morgan Stanley may not have deliberately set out to bamboozle and lie with figures, I am honestly suspicious of the motives of some of the international bodies who are, with one eye, targeting a business opportunity and how to warm itself to a regime, while with the other eye they seem to prod their affiliates to garland or castigate a regime as the case may be. In fact, among investment banks, the potential conflict between their research departments (which can put favourable or unfavourable rating on a stock or country) and their investment, brokerage or advisory arms, have long been recognised. And do not forget they often get their projections wrong – which is why some like Merrill Lynch have been successfully sued by their clients for misleading advice.

And what about those institutions that organise or sponsor awards for our critical office holders? Have we forgotten the numerous awards given to the managers of the banks that the CBN Governor Sanusi Lamido later accused their managing directors of monumental frauds? How do we reconcile the fact that Soludo and his successor in office Sanusi Lamido Sanusi were both named African Central Banker of the Year – despite representing different banking philosophies?

Three, I suspect that some of these organisations, including institutions like the IMF and World Bank, have a way of surreptitiously getting involved, or being dragged, into our domestic politics. For instance in October 2010, at the heat of the PDP’s acrimonious presidential primaries in which President Jonathan was perceived as being vulnerable on the management of the economy, the IMF came out with a report ranking Nigeria as the ‘third fastest growing economy in the world after China and India’ as it claimed that the economy grew from 6.9 percent in 2009 to 7.4 percent that year. The IMF cleverly made it sound as if economic growth is the same thing as economic development, implying that contrary to the position of Jonathan’s critics on the handling of the economy, things were actually getting better. I find similar suspicious positions in Morgan Stanley’s recent research note. For instance the researchers wrote: "External debt levels are among the lowest in emerging markets." Although this was merely a comparative statement, it was couched in such a way that it could also be taken to mean that Nigeria is under-borrowed - at a time many are justifiably worried at the level of debts being accumulated by the regime.

Local firms also do get involved in projections that appear too good to be true, raising also questions about their motives. For instance FN Capital Ltd, a wholly owned subsidiary of First Bank Plc, recently projected that the country’s foreign reserves - which fell by some 14% to $32.3 billion as of June 24 compared with a year earlier despite the fact that Bonny Light crude added 38 percent over the same period - would rise to 24 percent because of the creation of Sovereign Wealth Fund. Depletion of foreign reserves was one of the vulnerable points of President Jonathan during the last presidential election.

I am of course not implying that all positive analyses or projections of our economy are wrong or done with ulterior motives. The point is that some are simply too good to be true. Take for instance Morgan Stanley’s declaration in the aforementioned research note that the Nigerian economy is “on a growth charge”. Many Nigerians would wish this were so. But if this were really true, in which sectors of the economy are the effects of such ‘growth charges’ being felt at the moment- employment generation, the manufacturing sector, nation-building or what? If Nigeria’s economy is truly on a ‘growth charge’, the benefits must be trickling down to some people - apart from political office holders.

Why Col Kangiwa Umar declined a ministerial appointment

Following reports that Col (retired) Kangiwa Umar, the radical former military Governor of Kaduna State (August 1985 to June 1988) turned down an offer for a ministerial appointment; I sent him a text message disagreeing strongly with his decision. I argued that rejecting the appointment was wrong because social critics like him needed to prove that they can not only talk the talk but also walk the walk.

In his reply Col Umar argued that by declining the offer he merely wanted to make the point - especially at a time many public figures appear to be in a sort of rat race for political offices - that one does not necessarily need to have a political appointment to be able to contribute to national development. He further wrote: “Government critics are doing both talking and walking. If we were to make ourselves readily available for service under every government, we will be accused of opportunism.” I believe opinions will be sharply divided on Col Umar’s position on this. What do you think?