Nigeria and South Africa: Beyond the GDP rebasing

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Nigeria will release its rebased gross domestic product (GDP) statistics in about two weeks. BusinessDay has learnt that the new numbers will show Nigeria’s GDP rising by 65 percent to $432 billion, meaning the country has overtaken South Africa as Africa’s largest economy.

The figure confirmed by sources at the National Bureau of Statistics (NBS) suggests that the Nigerian economy has been hugely underestimated over the years.The NBS is seeking to change the calculations of Nigeria’s GDP using a new base year of 2010 to give a better indication of the size and composition of its economy.

Most governments overhaul GDP calculations every few years to reflect changes in output and consumption, such as telecoms, financial services and internet usage, but Nigeria has not done so since 1990 (24 years) suggesting that the previous GDP framework underestimated economic activity.

Some have called the rebasing of Nigeria’s GDP being undertaken by the NBS an exercise in financial engineering but we beg to differ. We believe the rebasing is imperative, and that the updated numbers tell the accurate picture which will have new implications for investors and the geopolitics of Nigeria’s place in Africa.

Nigeria’s rebased GDP of $432 billion compares with South Africa’s GDP of $370.3 billion at year end YE 2013. In a sense Nigeria’s current economic output is underperforming its potential output with its large population of 170 million, which is 3 times the size of South Africa’s at 52 million.Nig-s-africa-indicator

Certain data points, however give us an insight into the drivers of economic output that has allowed Nigeria to emerge as Africa’s largest economy.

Nigeria overtook South Africa in 2012 to become sub Sahara Africa’s (SSA) largest cement market with installed capacity of 28 million metric tons per annum (mtpa) compared with SA production of 18.3 million mtpa.

Nigeria is Africa’s largest telecoms market with 121.8 million active mobile lines (Oct. 2013), compared with South Africa’s 40 million. Nigeria had 56 million internet subscribers as at Sept. 2013, compared with South Africa’s 11 million. Telecoms contributed 8.53 percent to Nigeria’s GDP (Q1 2013), up from negligible levels in 1990, which is the base year for current GDP statistics.

While oil and gas growth has been anemic in recent years, Nigeria still pumps Africa’s largest oil output, producing 2 million barrels a day. Meanwhile Nigeria exported some 19.6 million metric tons of LNG in 2012, the fourth-largest output worldwide, according to data compiled by research firm IHS.

Nigeria’s services sector (Nollywood, entertainment, music, hotels, retail… etc) have mushroomed in recent years and has not been effectively captured by current GDP statistics, leading to an invariable under-estimation of personal consumption figures. Household consumption expenditure (HCE), the largest component of GDP by expenditure is often equivalent to 60-70 percent of total GDP. NBS sources note that the most recent HCE figures already exceed current-non rebased GDP of $283 billion.

In the current GDP time series Agriculture is said to make up 40 percent of the economy. This is most likely outdated, and based on a 1990’s economy whose structure has changed significantly. Once rebased GDP statistics are released, it will show that even as Agriculture’s aggregate numbers have grown, it will probably make up less than 30 percent of GDP.

South Africa’s economy grew by 1.9 percent in 2013, compared with 6.81 percent real GDP growth in Nigeria. Its current account deficit widened to 6.8 percent of GDP in the third quarter of 2013, compared with a C/A surplus of 5.2 percent of GDP (YE2013) for Nigeria.

Finally since GDP is a country’s domestic output measured by or converted to dollars, a look at the performance of both countries’ currencies helps to complete the story. While the Nigerian Naira has been largely firm (down 1.9 percent vs. the dollar in the past year) the SA rand has lost 23 percent versus the dollar since 2013.The rand weakened past the 11 per dollar mark last Friday for the first time since October 2008.

 By: PATRICK ATUANYA & BALA AUGIE

16 Responses to Nigeria and South Africa: Beyond the GDP rebasing

  1. Dat is excellent nigeria gradully is moving to it promise land but more attention on agriculture since it the bedrock of nigeria economy to enhance productivity and GDP growth.

    ogar ndoma
    January 27, 2014 at 7:38 am
    Reply

  2. The last paragraph takes from this analysis. GDP does not have to be conmverted dollars(convetrted to dollars only for ease of comparison) and the fact the SA dollar depreciated does not mean they are producing less goods and services. it could actually spur production and increase GDP growth. The Japanese currency has performed almost as bad recently but it has helped their exports. otherwise brilliant analysis showing how much the nigerian economy is changing but i am wondering, what is the base year for SA’s current GDP and is it due for rebasing soon too and if that happens, would they overtake Nigeria again? It would be worth investigating. So these could all be just a number game unless we can transform the growth we are seeing into actually development.

    KK
    January 27, 2014 at 8:43 am
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  3. Whilst it’s good news that Nigeria has finally overtaken South Africa to assume it’s rightful place as the largest economy in Africa, we should however pause for reflection upon the following facts:

    (1)- South Africa still has the most diversified/sophisticated economy in Africa. (2) South Africa has the best infrastructure (roads, rail, airports, seaports, telcommunications, hospitals, higher institutions etc)in Africa. (3) South Africa’s power output (over 40,000MW) dwarfs that of Nigeria (about 4,000MW).

    (4) South Africa is the only country on the African continent that has and operates nuclear power plants (5) The JSE (with a market capitalisation of over $900billion is the largest stock exchange on the African continent. The Nigerian Stock exchange is the second largest with a market capitalisation of about $114billion.

    (6) The busiest and largest Airport in Africa is the Oliver Tambo airport in Johannesburg, which had over 18 million passangers in the year 2012/13. It can also accommodate the Airbus 380 – the largest commercial passanger plane in operation at the moment. Murtala Muhammed Airport in Lagos handled just over 7 million passangers for the year 2012/13. None of our airports (MMA included) can handle the Airbus 380.

    (7) GDP per capita for South Africa is about $6,800 whilst that of Nigeria (with the rebasing) will be about $2,600. (8) The biggest banks and telecoms companies on the contient are South African. (9) South Africa’s economy has a rating of BBB which is investment grade. Nigeria has a rating of BB-, which is three notches below investment grade. (10) For ease of doing business out of 182 countries, South Africa is rated at No.52 in the World, whilst Nigeria is rated 147.

    I could go on and on. In a nutshell, we still have a LONG WAY TO GO.

    Finally let’s realise that we cannot eat GDP and so unless there is a tangible improvement in the lives of our citizens, these new GDP figures mean abosolutely nothing to the average nigerian.

    Yagazie
    January 27, 2014 at 3:11 pm
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    • Well said Yagazie. There is a big difference between hallucinations and reality.the bottomless remains how it will affect the man on the street.

      onyeoma
      January 27, 2014 at 4:44 pm
      Reply

    • May God bless your knowledge more. This guys in government always thing they can deceive Nigerians. JOKERS!

      kayode okunola
      January 28, 2014 at 9:08 am
      Reply

  4. Great analysis. Most Nigerians have no knowledge of the sophisticated world of modern development/political economics and the imperative of building a sound national economic story in the attraction of both local & foreign investments that directly spawn good paying jobs which in turn closes the obvious gap between the haves & have-nots. This administration has brought real pragmatism to the management of the economy, hence the kind of wealth that financially literate nigerians are beginning to enjoy. They are doing many right things, I just hope the politicians will just allow this things to come together.

    kavod
    January 27, 2014 at 4:09 pm
    Reply

  5. This analysis becomes more significant when we are able to pin down our real population figures.

    adewale
    January 28, 2014 at 4:58 pm
    Reply

  6. When you take into account that Black South African income is about 1/2 of the average South African income. Pound for pound, Nigerians are likely earning as much as Indigenous South Africans.

    Also pound for pound. A Nigerian is more likely to be connected to the internet 28.4% than a South African 17.4%. When comparing Indigenous Nigerians on the internet to Indigenous South Africans the difference is no doubt even more stark. A Black person in Nigeria is probably 3 times more likely to have his/her own internet connection than a South African.

    http://www.internetworldstats.com/stats1.htm

    South Africa has 1.2m sqkm of land, but Native South Africans have 27% or less i.e. 0.32m sqkm. Nigeria has 0.92m sqkm. Once taking into account Nigeria’s larger population (4x). The average Nigerian has as much land as a Native South African.

    If I were a Black person living in Africa. I would rather live in Nigeria than South Africa.

    It’s no coincidence that income inequality correlates with the degree to which a country was colonized. If the Rich-Poor gap generally increases, and only decreases by the Rich corporations funneling their profits back into the state that they profited from. Then when your rich are ‘foreigners’, they will funnel their profits into their own country.

    There are hundreds of examples of this. A good one is Western firm Anglogold Ashanti. The idea here is that you mine (take) gold from Africa, pay a small tax to the locals, and provide jobs for a few thousand local Africans, sell the gold elsewhere (Europe/America), while the shareholders (European/American) profit.

    Now imagine the China model. Chinese company mines China for minerals, sells minerals to the west, China profits.

    With the basic concept of conservation of energy. Its easy to understand why China’s economy is rocketing, while those who were colonized are just sitting on the sidelines watching foreigners legally steal their resources.

    b199er
    February 15, 2014 at 11:10 am
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  7. Yagazie can dusplay all the indicators he wants but Nigeria still stands as the biggest economy on the continent . South Africa has been developing as a white homeland for the last 300 or so odd years while Nigeria was nothing by 1960 (independence year from raw material sucking Britain). When Nigeria was supposed to be a much smaller economy you were not counting roads and airports now jealousy is killing you . Nigeria is the world’s largest black economy which is totally managed by the best black brains in the world . In high school Maths and science Nigeria ranks the best on the continent while S.A. ranks last . A good education base also helps grow the economy not a permanent lack of basic skills that is endemic to South Africa .Some of the best banks on the continent are Nigerian although they were created a few years ago as compared to S.A. banks that have been there for hundreds of years hence better capitalised . In spite of Boko Haram Nigeria’s GDP is projected to be almost twice that of S.A. by 2020 – just 6 years away .Stand by and watch the awakening of the sleeping continental giant – Nigeria .

    T. Thomas
    February 25, 2014 at 11:43 pm
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    • But why is this about race? We have a level playing ground to develop our basic infrastructure and overtake any country. Why must skin colour come in?

      ryth
      April 15, 2014 at 8:49 am
      Reply

  8. Richest African Countries (by 2013 GDP)

    1. South Africa: $595.7 billion (up 17.8%)

    2. Egypt: $551.4 billion (up 25.1%)

    3. Nigeria: $478.5 billion (up 50.6%)

    Gareth Barnard
    February 28, 2014 at 6:45 am
    Reply

  9. It is important that this GDP rebasing exercise is concluded speedily as it has much ramification for the economy as indices are presented in clearer and comparable perspective. We must strive to avoid occasions that make the country lag behind its peers particularly as the wrong signal could be sent to the international community regarding the attractiveness of the Nigerian economy. The consequences of this planned rebasing exercise would like a double edge sword cut on both directions and would particularly impact of the growth rate of the economy which we have come recently to celebrate as a measure of the health of the Nigerian economy. But be that as it may it is important that we imbibe the habit of doing the right things at the correct time in the greater interest of the Nigerian economy.

    Dr. Boniface Chizea
    March 8, 2014 at 3:27 pm
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  10. It is great news to hear that Nigeria is set to overtake South Africa after re-basing its GDP. Nevertheless, it must be remembered that since Nigeria is about thrice the population of South Africa, it is not celebration yet until Nigeria’s GDP triples South Africa’s GDP. By simple law of proportion, this is only when Nigeria can minimally be performing at the same rate with South Africa in terms of income per capita. Overtaking South Africa’s GDP is a necessary first step. But catching up with South Africa per capita may never be feasible until Nigeria’s economic planners begin to think of how to create jobs for the large army of Nigeria’s unemployed. No economy can sustainably grow when more than one-third of its trained labour is idle and when its economy is mono-product! The issue then is: for how long is Nigeria going to be the largest economy in Africa?

    A.U Nwosa
    March 21, 2014 at 11:15 am
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  11. why do we always pretend that all is well,when things are really bad. An average Nigerian need quality education, job, food,health and peace. not the so called GDP rebasing paper work that wont change the economy.

    zy
    April 14, 2014 at 10:01 pm
    Reply

  12. Nigeria may be Africa’s largest economy but still we are not among the top 10 most developed according to HDI values. So this news, as good as it is means nothing if it does not translate to the country’s overall living standard.

    Okoli
    May 10, 2014 at 9:03 am
    Reply

  13. Thanks for this piece of information..kudos to everyone who posted a comment,I learned from all..

    kulpresh
    May 24, 2014 at 9:35 am
    Reply

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