Few days after being listed by the World Bank as one of five countries with the highest number of extremely poor people, Nigeria has declared a Gross Domestic Product, GDP, of N80.3 trillion ($509.9bn), pushing ahead of South Africa as the continent’s biggest economy.
The new figure was announced Sunday by the National Bureau of Statistics after a rebasing that nearly doubled Nigeria’s GDP from N42.3 trillion.
The new GDP compares with South Africa’s GDP of N60.7 trillion ($370.3bn) at the end of 2013.
The GDP index is the total value of a country’s goods and services over a period of time.
Rebasing is carried out to give the most up-to-date picture of an economy as possible. Many countries rebase their GDPs after every few year but Nigeria’s was last computed in 1990 when there was limited growth in most economic sectors.
The new calculation, released by the statistics bureau, now includes previously uncounted industries like telecoms, information technology, music, online sales, airlines, and film production.
The new figure shrank Nigeria’s debt-to-GDP ratio to 11 percent for 2013, against 19 percent in 2012, the Statistician-General, Yemi Kale, said on Sunday.
The rebased estimates indicate that the nominal GDP for Nigeria was much higher than previously estimated . In 2010 the estimate was $360. 644 billion; in 2011 it was $408.805 billion; and 2012 $453.966 billion.
The growth rate is driven by the services sector with it contributing about 51 per cent of the GDP.
The rebasing exercise on the Nigerian economy which also saw the Per capita rising to $2, 688, covered 2010 to 2013. Nigeria has moved on the per capita scale from 135 to 121st position.
This is after more than two decades of the last exercise in 1990, far beyond the United Nations Statistical Commission, UNSC, recommendations that countries should rebase their national accounts (GDP) estimates every five years.
Dr. Ngozi Okonjo-Iweala, Finance Minister and Coordinating Minister of the economy, said that the results had been subjected to a six-man independent panel of reviewers led by Prof. Olu Ajakaiye, as well as representatives of multilateral organizations, especially the International Monetary Fund, the World bank and the African Development bank.
According to her the policy implications of the new figures were that the nation has a larger capacity for consumption and thus make Nigeria more attractive to international and local investors.
She admitted however, that the government needed to build social safety nets to close the income inequality gap in the country saying, “inequality has been rising so we need to build social safety nets meant to take care of those at the bottom of the ladder”.
The minister added however, that the oil and gas sector also needed Federal Government attention, as according to her, a sector with over 15 per cent contribution to the GDP cannot be ignored.
Dr. Okonjo-Iweala also said that the sudden leap of the large contribution of the services posed a challenge for the government to take more measures for a stronger manufacturing sector, in conjunction with the organized private sector.
The new figures indicated a debt to GDP of 11 per cent, down from 19 per cent but the minister said that the federal government would continue to be prudent in its debt portfolio to avoid a situation in which the country could fall into a non-sustainable debt trap, as was the case, in the past.
In his presentation, the S-G said that the past GDP estimates were less than the real position of the economy and that there was need to take another look at the nation’s poverty rate.
The S-G said however, that “GDP is a macroeconomic aggregate that depicts the totality of economic output within a nation’s borders. While it depicts how rich a nation is, this is not necessarily the same as showing how rich the individuals in the nation are, due to the problem of unequal distribution of wealth.
On methodology, Dr. Kale disclosed that preparatory work for the rebasing exercise commenced in the last quarter of 2011.
He said several activities were undertaken, some of which include the on-going development of a Supply & Use Matrix, field surveys for certain economic activities which were not adequately captured previously, validation with sector experts as well as the international development partners.
S-G added that three major methodological pillars were used to compile the rebased GDP estimates: the System of National Accounts (SNA 2008 version), the International Standard Industrial Classification (ISIC Revision 4); and the Central Product Classification (CPC version 2).
Wholesale and retail trade was the economic activity with the most notable changes between the old and new GDP series. This is attributable to the effort made by the NBS during the rebasing exercise to capture more of the informal sector. Telecommunications and information services; motion pictures and sound recording; cement production; food, beverage and tobacco; construction and real estate sectors also witnessed significant changes.
But many Nigerians and economists believe such numbers do not bring any change to a country with about 70 percent of its population in extreme poverty.
“GDP rebasing is not an end in itself. It is a means to an end. The end being the economic wellbeing of the average Nigerian. With the rebased GDP, our Per Capita Income is now $2,668 and the 121st in the world,” said Egheomhanre Eyieyien, a chartered accountant and a business consultant.
“We still have much work to do to increase our national wealth and ensure that the standard of living of our people us greatly improved. Our Human Development Indices (HDI) prove this point. We must improve on health care, access to clean water, life expectancy, maternal mortality, infant mortality, literacy, quality of education, employment generation and poverty eradication.”
Last week, the World Bank listed Nigeria alongside four others as countries with the world’s extreme poverty- a rating the Nigerian government rejected.
On a per-capita basis, South Africa’s GDP numbers are three times larger than Nigeria’s. Analysts say Nigeria’s output is underperforming with its population three times South Africa’s.
Analysts say the rebasing is to enable the government come up with figures to support claims of the superlative performance of the country’s economy, said to be growing at about 6.5 to 7 per cent annually.
But, the pronouncement by the World Bank President appears to have removed the sail from government’s wind, as it highlighted the disconnect between government’s statistics and economic reality.
The World Bank President, Jim Yong Kim, who was addressing participants at the Council on Foreign Relations, CFR, meeting in New York, named India, China, Bangladesh, and the Democratic Republic of Congo as the other countries in the new global poverty categorization.
“The fact is that two-thirds of the world’s extreme poor are concentrated in just five countries – India, China, Nigeria, Bangladesh, and the Democratic Republic of Congo,” he said.
“If you add another five countries — Indonesia, Pakistan, Tanzania, Ethiopia, and Kenya – the total grows to 80 percent of the extreme poor.”
Kim, who defined extreme poverty as “people living on less than $1.25 a day”, said “more than a billion people in the world live on less than that each day.”
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