On 7 April, Nigeria’s GDP ballooned by 89 percent to a new estimate of $509.9bn after the country rebased its economy for the first time in 24 years. The new number makes Nigeria largest economy in Africa, and the 26th largest in the world.
But in the case of Nigeria’s dramatic jump, the story of what rebasing the country’s GDP tells us – and does not – about the economic fortunes of the world’s newest middle income nation is far more complicated than a straightforward narrative of growth.
The World Bank recommends that countries rebase their GDP data every three to five years, Nigeria failed to do so since 1990. This does not mean Nigeria has not produced national statistics since then; rather, that the datasets on which these calculations have been made up until now were significantly out of date. Nigerian statistics were known to be so unreliable that the country’s own central bank used to use its own data rather than rely on those produced by the national bureau of statistics.
Despite a history of inaccuracy, Nigeria’s new GDP data has been readily accepted by international economic and financial communities – and, though imperfect, it does tell us more than we knew before.
“If I had to choose between the 1990 base year data and 2010 base year data [used to calculate the 2014 rebase], I go with with the 2010 data – and that is what everyone is doing,” says Morten Jerven, a leading expert on African development statistics and a professor at Simon Fraser University. “It is a better number, that doesn’t say it is a perfect one.”
While the new base numbers also drop Nigeria’s debt-to-GDP ratio from 19 to 11 percent, this will not change Nigeria’s borrowing capacity as some predicted, explains Razia Khan, Africa economist at Standard Chartered. “Unless NIgeria has access to new streams of income, repayment capacity will not alter dramatically at all,” she says.
Since the 1990 rebase, the country has undergone substantial political and economic changes; from the transition from military to civilian rule in 1999 to the emergence of new, multibillion dollar industries such as digital communications and film as a major driver of growth
It was not until recent years, when African markets began to attract greater attention from outside investors, that the importance of having good data began to be recognised.
“During that period [1990-2000], under [former President] Obasanjo, Nigeria’s main concern in dealing with the IMF, the World Bank, and international creditors was to get debt relief,” Mr Jerven explains. “Only more recently has it become a political goal to reach middle income status, to be able to attract finance on international capital markets, and so forth.”
Debt relief is only granted to low income status countries. As recently as 2005, Nigeria brokered a deal with the Paris Club of western financial institutions to receive $18bn in debt relief, and an overall reduction of total debt stock of $30bn. However, with its new GDP, Nigeria will no longer be considered low income despite high poverty rates and rapidly growing inequality. New data from the National Bureau of Statistics shows that 61 percent of the Nigerian population lived on less than a dollar a day in 2010, rising from 52 percent in 2004.
“Nigeria may no longer be eligible for some forms of concessional debt,” explains Standard Chartered’s Ms Khan. “It is rather unfortunate that it looks to be a much wealthier country than it is if we were to look at median per capita incomes. Nigeria is still essentially a poor country, but if you are just looking at averages you will miss that entirely.“
Timing the release
On the domestic front, Nigeria is heading for a hotly contested presidential election in early 2015, while internationally it is competing with the rest of the continent for investments and borrowing opportunities. How much politics factored in, however, is still up for debate – as is whether the logic behind a politically motivated release stacks up.
“If you’re looking at the numbers its not necessarily a screaming positive,” Ms Khan argues. “What it does highlight is that Nigeria is just a far more unequal society, a country, than most people would have believed.”
New statistics on government revenue collection outside of the oil sector, which supplies 70 percent of revenues, are also not very promising. “It highlights some pretty alarming ratios. Revenue to GDP falling to less than 5 percent is not a hugely positive signal at all given that it is almost 15 years into civilian rule,” says Ms Khan. “That is about the weakest revenue mobilisation ratio anywhere.”
Nigeria’s heavy reliance on survey, rather than census data, to build its new GDP base means that the resulting numbers carry a human touch. Survey data collects information on a small sample of a given sector, whereas a census data requires gathering data on a sector as a whole. However, the latter is very difficult in a country like Nigeria where businesses are often unregistered and unregulated. New census data on the country’s business and agriculture sectors, for instance, was not ready in time for the rebase.
When complete data is not available, guesses had to be made, extrapolating from the small amount of information available. “There is so little raw data, so little basic data, to support the final aggregate,” claims Mr Jerven at Simon Fraser University.
Then there is also the problem of basing educated guesses for the performance of an entire sector on a small fraction of the most visible part of the economy. Nigeria’s informal sector, for instance, makes up a large part of the country’s overall economic activity – but it is notoriously difficult to measure. “The smaller economy, the informal sector, might operate on far smaller margins than the visible economy, therefore you overestimate how well the service economy is doing altogether,” he says.
As a result, Nigeria’s rebased GDP is a more contemporary snapshot of how Nigeria is performing economically – but that picture, and its ready acceptance by the international community, is colored by the interests and personalities of those who have a stake in the numbers.
“The key here is that its not about validity per se – as in accuracy. Validity is a power thing,” Mr Jerven concludes. “If everyone important sitting around the metaphorical table agreed that this is a number we will be going forward with, then it is the new number.”
The poorest rich country around – News – This is Africa.