Understandably, Nigeria’s new economic status has continued to polarize economists, analysts and policy think-tanks along a broad spectrum of development issues. With its GDP base reviewed from a mostly assumed and poorly measured 1990 figure to a more accurate and broad-based 2010 figure on Sunday, 6 April 2014, Nigeria has since emerged as the 26th biggest economy in the world and Africa’s largest. But this new boosted ego of “Big Brother Africa” in terms of economic weight and size has however attracted more critics than advocates.
Nigeria’s case, truly, is a curious paradox.
At about the time it rebased its GDP to arrive at a reviewed estimate of $509.9 billion (N80.2 trillion) for 2013, overtaking South Africa’s $372 billion for the same period; the World Bank declared Nigeria as a very poor country with a significant portion of its vast population living on less than $1.25 a day.
Nigeria’s huge population of about 175 million people makes the country the 7th most populous in the world. With about 33.3 percent of this number constituted by young people, Nigeria has a large labour force (11th in the world) and a large market for consumer goods and services. Yet, it is rated 147th on the World Bank’s Ease of Doing Business Index for 2014.
There are other factors that are easily pointed out as why Nigeria’s new economic status is considered an illusion. These range from epileptic power supply (below 4,000 Megawatts) to incessant fuel scarcity (in a prominent OPEC member), high unemployment level (previously rated at 23.9 percent), wide infrastructure deficit, poor Gini co-efficient and rising inequality, low per capital income (the reviewed figure of $2,688 is still well below regional average), and poor performance on the UN’s Human Development Index.
Because South Africa, which now ranks behind Nigeria, fares better in these indices, commentators have described the GDP rebasing as “a journey from reality to vanity”, an ego boosting exercise, a mere political statement or a “delusion of grandeur”. Sincerely, one could hardly fault these views, looking on the surface.
But GDP rebasing is not an end in itself. It is a means to an end.
In an era that is shaped by “Big Data” and the globalization of information it appears economically suicidal for any nation to continue to gauge its national output by a 24-year-old GDP base. Nigeria, surprisingly failed to rebase its GDP since 1990 in defiance of international norm as recommended by the United Nations Statistical Commission. Every country, according to the UN agency, is expected to do an overhaul of its GDP calculations every five years to account for structural changes in economic activities, base prices and inflation trends. By not doing this, the country had for about two decades continued to present a grotesque picture of its economic size and structure, and had been so viewed by the international communities of investors and development experts.
Everyone must begin to see GDP rebasing in its true light: A tool for economic analysis and planning, reflecting growth patterns and economic potential for development rather than a development index per se. Here lies the source of conflicting expert opinions flying around.
With Nigeria’s intimidating profile of being the most populous black nation on earth (Nigeria accounts for 2.35 percent of total world population meaning that 1 out of every 43 persons on the planet resides in Nigeria) and; having markets for labour, goods and services that are ranked among the world’s largest; having within its economy Africa’s biggest business concern, the Dangote Group, whose President and CEO is Africa’s richest man and parading a most vibrant and fast-growing capital market, one could see a regional frontier market and emerging Foreign Direct Investments (FDI) destination.
Why was South Africa preferred to Nigeria by foreign investors? Part of the answer was the inaccurate GDP figures the country was giving out for years. Telecommunications investors, for example, first dumped Nigeria for South Africa, due partly to erroneous data indicating impoverished consumer base with abysmally low purchasing power. Today, there are about 120 million mobile lines in Nigeria, a number more than double the entire population of South Africa.
Nigeria grossly underestimated its national output for years and was also planning its economy with inaccurate data not reflective of its national investments and expenditure needs. How, for example, could sectors like film and entertainment industry and the telecoms and internet services sector which contribute respectively about 1.42 percent (about N1.1 trillion) and 8.69 percent of the rebased GDP have been missing from our national income for decades?
The rebased GDP figures have shown that Nigeria’s economy is much more diversified than thought. After the exercise, the revised GDP for 2013 grew by 89.2 percent, agriculture’s previous share of the GDP reduced from about 33 percent to 21.97 percent, oil and gas sector reduced in its share of the GDP by more than half to about 15.9 percent while the services sector, covering information and communications, entertainment and arts, real estate, financial services, education and health services etc; has expanded significantly from 26 percent of GDP to over 51 percent. This, in the opinion of The Economist, reveals “that Nigeria is much more than just an oil enclave”.
There is now a reduced debt-to-GDP ratio, from 19 percent to 11 percent, suggesting more avenues for further borrowing though this is not advisable for now but the ratio paints the picture of a healthier economy to outsiders. Also, the reduced oil and non-oil tax revenue–to–GDP ratios from 20 percent and 7 percent respectively to 12 percent and 4 percent suggest a leaking economy. All these statistics are now readily available to aid the government in its policy formulation and execution towards Nigeria’s big dream of becoming one of the 20 biggest economies in the world by 2020.
Another significant fact is that Nigeria has set the pace for other African countries that are still living in the past, in terms of their GDP bases, to consider an overhauling of their economic variables.
According to a January 2014 survey report by the African Centre for Statistics, an arm of the United Nations’ Economic Commission for Africa, “Seven African countries still base on 1990 or earlier year for their GDP figures, ten have base years between 1991 and 2000 while another nineteen have base years between 2001 and 2005.” A top UN official recently commented following Nigeria’s rebasing exercise that, this implies the size and role of the African continent in the global economy might have been seriously underestimated for years.
A more diverse economy with truer picture of its GDP figures will necessarily attract FDI. And if the parameters used for this exercise, as monitored and validated by the IMF, World Bank and the African Development Bank are same in standard and modus operandi with those employed for all other countries of the world; then Nigeria’s economic status is in order as estimated. Rather than seeing the revised figures as a ploy by the government to boost its ego, they should be taken as legitimate grounds for keeping officials on their toes and as a premise upon which to begin questioning policy makers on why a country with the largest GDP in Africa should instead of being grouped among emerging economies; be ranked among the poorest of the poor.
I believe, like The Economist magazine (April 12th 2014) opines, that “Nigeria now looks like an economy to take seriously”. There is no reason for debasing the rebasing exercise.