Nigeria doubles GDP and exposes state
To savvy investors it has long been obvious that the Nigerian economy was bigger than officially recorded. But very few, if any, analysts were expecting gross domestic product to nearly double to $510bn when the government announced revised calculations for 2013 meant to capture more accurately the activity driving growth.
The new figures, released on Sunday after a lengthy review endorsed by the International Monetary Fund, place Nigeria well ahead of South Africa as the continent’s largest economy and within reach of the world’s top 20.
The statistical mismatch has been almost as great as the mixed messages that Nigeria has been sending about the state of the nation. It first became apparent as far back as 2001, when the big international players in telecoms declined to bid for mobile phone licences, having deemed Nigeria too poor for the risk.
They estimated then that only 5m-10m Nigerians could afford a phone. African companies picked up that number of subscribers in the first few weeks of business and, together with more recent entrants from India and the UAE, now share a market of 110m in a population of 170m.
As well as underestimating the formal economy “in particular the growth of services, up a staggering 240 per cent on the old figures” the data largely ignored the informal sector. Before Chinese imports began to destroy their trade, cobblers in the eastern town of Aba were producing some 60m shoes annually, many for export to other African markets. Like the national film industry, known as Nollywood, this kind of activity was statistically invisible.
The new figures highlight the extent of economic expansion over the past two decades, and capture a much wider range of activity than previously recorded. What they do not do is alter the messy reality of today.
After all, as many sceptics have been pointing out on social media, Nigeria is now a $510bn economy whose entire national grid delivers about as much electricity as a midsized European city; whose roads and ports are chronically clogged, and whose public education system and health services are in dire straits.
Fix all, or even some, of these and it is not difficult to imagine Nigeria’s economy quickly doubling in size again.
What also emerges from the new statistics is the weakness of the state. This partly explains the conflicting signals emerging from what is now Africa’s leading economy as well as its top oil producer and most populous nation.
Only two weeks ago, Standard & Poor’s downgraded Nigeria’s sovereign rating in the midst of a scandal over allegedly missing oil revenues, declining foreign reserves and pressure on the naira. Shortly afterwards, World Bank president Jim Yong Kim noted that Nigeria was one of five countries that between them are home to two-thirds of the world’s population living in extreme poverty. Yet none of this bad news stopped potential investors from Africa and further afield flocking recently to a series of investment conferences in Lagos “a city that, in the not so distant past, scared off all but the hardiest of travellers. In an environment with so much pent-up demand the opportunity is great.
On the bright side, the new figures reduce public debt-toGDP from 19 per cent to 11 per cent, potentially opening the way to greater borrowing. But they also magnify two more worrying trends: the government’s continuing dependence on oil for revenues, and the uneven way in which the spoils of growth have been distributed. With non-oil tax revenues of just 4.5 per cent, Nigeria’s fiscal base is narrow, to put it mildly.
Meanwhile, that 60 per cent of the population are living in extreme poverty in an economy much larger than previously thought demonstrates the unequal concentration of wealth and explains why so few Nigerians were uncorking champagne when the country vaulted into Africa’s top economy slot on Sunday.
The statisticians have given a clearer and more complex picture of where economic activity lies. The question now is whether government can tax it. On this rests Nigeria’s ability to create a more accountable government and a fairer and more stable society. (FT)