Following the rebasing of its GDP in April, Nigeria overtook South Africa to become Africa’s largest economy. But what does all this mean in real terms? There have been some surprising reactions. Frederick Mordi has the details.
On 6thApril 2014, the Nigerian government released the result of the nation’s rebased GDP. The new figure, which stood at N80.2trn ($510bn), as at 2013, represents an 89% increase over the previous GDP of N42.4trn (about $267bn). Nigeria’s revised GDP surpassed South Africa’s $384bn. This effectively makes Nigeria, Africa’s largest economy as well as the 26th largest in the world, up from 33rd position.
The announcement caused no small excitement in the country particularly within government circles. This is understandably so because Nigeria has played second fiddle to South Africa for a long time. While some
experts believe that the new GDP is a reflection of Nigeria’s true economic reality, others see it as a mere public relations stunt designed to shore up the government’s image.
GDP rebasing is the process of replacing an old base year with a more recent one which reflects the dynamic price structure and captures economic growth. Most countries review GDP calculations every few years to reflect changes. The International Monetary Fund’s (IMF) standard for GDP rebasing is every five years. But in Nigeria’s case, it took 24 years.
The last time Nigeria conducted a GDP rebasing was in 1990. It was not done in 2000 as originally planned. Nigeria’s pursuit of debt relief from the Paris Club and other multilateral partners was partly responsible for the delay. Had the government reviewed the GDP in 2000, Nigeria, which was rated ‘a low income economy’ then, might not have qualified for debt forgiveness, as the economy would have moved up to medium income level.
The current Minister of Finance and Coordinating Minister of the Economy, Ngozi Okonjo-Iweala, who was the then Finance Minister, played a major role in securing debt relief for Nigeria, using her clout with the World Bank, where she was a former managing director. The country was eventually granted debt forgiveness in 2006. Since then, the GDP growth rate has been on the rise, averaging 7% annually, making it one of the highest in Africa.
Justification for exercise
The statistician-general at the Nigeria Bureau of Statistics (NBS), Yemi Kale, who announced the result, says rebasing of Nigeria’s GDP became necessary as data estimates for the country before now had been pegged to base year 1990. This means that the GDP had been expressed in terms of prices of goods and services obtainable 24 years ago. Kale says rebasing goes beyond new figures, adding that it is a good measure of economic performance.
For instance, he points out, the old GDP figure did not capture growth triggered by the advent of GSM in the country in 2001. In 1990 when the rebasing was done, Nigeria had less than 500,000 fixed telephone lines. Currently, there are over 120m mobile phone subscribers in the country.
The old GDP did not account for new businesses that have sprung up since 1990. It did not also take into consideration the contribution of Nollywood, the prolific local film industry. Nollywood, which did not appear in the 1990 figure, is said to have contributed 1.4% to the new GDP. More small and medium-scale enterprises (SMEs) have also been included in the revised figures. All these factors made a review of the GDP essential.
However, the NBS statistician-general warned that the data should not be confused with current economic realities.
Kale says: “Rebasing does not change what was already there. It is just about measuring better and more accurately.”
The rebased figures showed an appreciable growth across diverse sectors of the economy, including entirely new industries such as telecommunications, music and filmmaking, previously omitted in the old calculation.