The New African Order
The Nigerian statistics office, recognised by the IMF, has recalculated Nigerian GDP and the economy is now 89% larger than it was previously stated. This makes it the 22nd largest economy in the world (measured in current market prices in US$) – compared to 37th pre-revision, and the largest economy in Africa – now 49% bigger than South Africa.
Total GDP in Nigeria Pre- and Post-revision: 2010-2013
Source: National Bureau of Statistics
Note: Data refer to GDP in current market prices. 2013 data are estimates.
- At an estimated US$523 billion in 2013, Nigeria is now Africa’s largest economy, which is a chiefly symbolic status, although the authorities hope that Nigeria can capitalise on this to receive greater inflows of FDI;
- Nigeria also has the largest population in Africa, at 171 million in 2013, and is home to almost one in five Sub-Saharan Africans;
- It is also Africa’s largest oil producer with 2.4 million barrels per day compared to 1.8 million barrels per day in Angola, Africa’s second largest oil producer.
Good News on the One Hand
One of the underlying good news stories is that the economy is also more diversified than previously thought. The service sector has seen the most striking revision, with the new figures 240% higher than the old. Within this, GDP from telecommunications and information services is now 19 times higher than previously thought. Perhaps unsurprisingly when the percentage of the population using the internet has more than doubled since 2008 to reach 36.5% in 2013; and when there were 705 mobile subscriptions per ‘000 population in that same year. Although it should be pointed out that these figures remain significantly below South Africa’s.
The revision to GDP also lessens the comparable burden of public debt, because as a percentage of GDP public debt has been reduced from (an already low) 19.5% to 11.0% – the third lowest in Sub-Saharan Africa, behind Equatorial Guinea and Liberia. A high debt burden and the corresponding interest payments can cripple government finances.
Fundamental Weaknesses of the Nigerian Economy
The revision of GDP does not alter the fundamental weaknesses of the Nigerian economy. In fact FDI intensity and the current account surplus, measured as a percentage of GDP now look worse at 1.5% of GDP (2012) and 2.3% of GDP (2013) respectively.
Nigeria fares badly in a whole host of indicators defining the business environment. It ranks 144th out of 175 economies in Transparency International’s Corruption Perceptions Index, 147th out of 189 countries in the World Bank’s Ease of Doing Business ranking and 120th out of 148 countries in the World Economic Forum’s Global Competitiveness Index. In terms of human development it is 153rd out of 186 countries in the UNDP’s Human Development Index ranking. In all of these indicators Nigeria significantly lags South Africa.
Nigeria and South Africa’s Position in Selected Global Rankings
Source: Euromonitor International from Transparency International/World Bank/World Economic Forum/UNDP
Despite per capita GDP now standing at US$3,056, poverty is widespread. In 2011, 78.5% of the population lived on less than US$2 per day. This figure may get revised downwards in light of the new GDP figures, but for a middle income country, poverty will undoubtedly remain disproportionate.
The tax base appears to be even smaller than it was before when looked at as a percentage of GDP. In 2013, calculated using the revised data, taxes and social security contributions amounted to 16.3% of GDP. In South Africa, the comparable figure was 22.7%.
In terms of educational attainment, Nigeria is also found lacking. In 2013, just 6.8% of the population aged 15+ had a higher education, compared to 11.0% in South Africa. The road network density is low at 0.2 kilometres per km2 of land – compared to 0.7 in South Africa and only 15.0% of roads were paved, compared to 22.2% in South Africa. But perhaps most striking of all, is the difference in terms of electricity production – in 2013 Nigeria produced 191 KWh per capita compared to 5,076 in South Africa.
Size Isn’t Everything
So the Nigerian economy may be significantly larger than previously thought, and bigger than South Africa’s, but the scale of the work to be done to improve the business environment and the living standards of the population has not diminished. The challenge remains immense.