Nigeria now Africa’s biggest economy, overtakes S’Africa

President Goodluck Jonathan

The Federal Government on Sunday finally released the result of the rebased Gross Domestic Product for the country, which showed that the Nigerian economy had overtaken South Africa’s as the biggest on the continent.

The Statistician General of the Federation and Chief Executive Officer, National Bureau of Statistics, Dr. Yemi Kale, who presented the outcome of the preliminary estimates of the GDP in Abuja, said that following the rebasing exercise, the country’s real GDP for 2011 and 2012 now stood at 5.09 per cent and 6.66 per cent, while the economy grew by 7.41 per cent in real terms last year.

He stated that the numbers were still going through a final refinement and that by June this year; the final estimates of the nominal GDP would be released.

Rebasing of the national account series, which includes the GDP, is the process of replacing an old base year with a new and more recent one.

The base year provides the reference point to which future values of the GDP are compared and it is a normal statistical procedure undertaken by the national statistical offices of countries to ensure that national account statistics present the most accurate reflection of the economy.

The key benefits of the rebasing exercise are that its results enable policy makers and analysts to obtain a more accurate set of economic statistics that are truer reflection of current realities for evidence-based decision-making.

Rebasing also reveals a more accurate estimate of the size and structure of the economy by incorporating new activities, which were not previously captured in the computational framework.

This is the first time the Nigerian economy will be rebased in almost a quarter of a century.

The presentation of the new figures was attended by key officials from both the public and private sectors of the economy as well as representatives of the World Bank, International Monetary Fund and the African Development Bank.

Kale said the results from the rebased estimates indicated that the nominal GDP for the country had now become larger than previously estimated.

For instance, he said the rebased nominal GDP for 2010 was N54.20tn; while for 2011, 2012 and 2013, he put the figures at N63.25tn; N71.18tn and N80.22tn ($510bn), respectively.

The implication of this, he added, was that the country had now overtaken South Arica to become the largest economy in the continent of Africa and 26th globally.

South Africa’s GDP for 2013 was $370.3bn (N60.7tn)

In terms of per capital income, which measures the income per individual, Nigeria is now ranked 121st from 135 with an average GDP per capital income of $2,688.

On sectoral performance of the economy, the NBS boss said the results indicated that the structure of the Nigerian economy had changed significantly leading to a decline in the share of the agricultural sector and a rise in the share of services in nominal GDP.

The implication of this, according to him, is that the country now has a stronger diversification of the economy than earlier reported.

Kale said, “Analysing the 1990 nominal series, agriculture contributed 30.3 per cent to the GDP, while industry contributed 46.1 per cent and services contributed 23.6 per cent.

“According to the rebased 2010 series, in nominal terms, the share of agriculture has declined to 24 per cent. The share of industry to the country’s GDP has also declined to 25.8 per cent, while the share of services to the country’s GDP has increased to 50.2 per cent.

“The number of economic activities accounting for 70 per cent of nominal GDP has risen from three to six after rebasing.”

He also said wholesale and retail trade was the economic activity with the most notable changes between the old and new GDP series.

This, according to him, is attributable to the efforts of 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.

Commenting on the outcome of the exercise, the Minister of Finance, Dr. Ngozi Okonjo-Iweala, said the rebasing though commendable, would not make poverty and unemployment disappear overnight, but would give the government the needed tools to tackle the problems in order to reduce poverty and improve the welfare of the people.

She said, “Not all our ratios look good. Our revenue to GDP ratio doesn’t look that good. We have a tax to GDP ratio of about 20 per cent, which is in the range of emerging market economy, but our non-oil tax to GDP ratio Is quite low at seven per cent.

“With this new GDP numbers, we are not going to look so good. Our tax revenue to GDP ratio will fall to about 12 per cent and four per cent for non-oil tax to revenue.

“We have started moves to improve our non-oil revenue by working with the FIRS to improve their approach to tax administration, and we are blocking the loopholes and strengthening tax collections.”

The international development partners such as the World Bank, IMF and the ADB endorsed the outcome of the country’s rebased GDP

The IMF Resident Representative in Nigeria, Dr. Gene Leon, who spoke at the event on behalf of multilateral institutions, said the task of producing quality statistics for the country had just begun.

He said, “The CME has underscored that the efforts being made to improve the statistics of the federation is a basis for sound decision making. Let me say we endorse wholeheartedly the outcome of this process and we support Nigeria in this regard.

“Data is not an end in itself. Changes in statistics should fulfil a purpose. The relevant question today is: Have the huge efforts been valuable? From a decision making perspective, the answer is unquestionably yes.

“The data and sources have been expanded. The methodology has been improved and the knowledge of the structure of the economy has been significantly enhanced.”

‘Nigerians not richer with new GDP’

Economic and financial analysts said the nation’s rebased GDP figure of $510bn did not make Nigerians richer in any way.

They said the new GDP figure was only good for the purpose of standardisation and served as a basis for comparing the nation’s economy with other countries’.

According to the Chief Executive Officer, Financial Derivatives Limited, Mr. Bismark Rewane, the GDP is an output measure and should not be misconstrued as a revenue measure in view of the way some analysts have been commenting on it.

He said there was really nothing much to be excited about because it had not in any way improved the live of the common man.

Rewane, however, noted that the rebased GDP figure would help foreign investors to better understand the size and components of the nation’s economy.

He said, “The new GDP figure had not increased the amount of money in people’s accounts; the prices of goods have not changed; the value of the currency has not changed; and there has not been more jobs.

“The new $510bn is far away from the $900bn target we have for our Vision 2020, which is just six years away.”

He said the new GDP figures would reduce the nation’s economic growth from the current average of seven per cent to about 4.5 per cent by the next quarter.

A professor of Economics at the Olabisi Onabanjo University, Ago Iwoye, Ogun State, Sharafadeen Tella, said the new figure did not impact on the lives of the people directly.

He, however, said if the government could work on sectors lagging behind, it could help to improve the economy in the future.

Tella said the fact that Nigeria’s per capita income was still the 121st in the world meant that the country was far away from development.

The Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, pointed out that the rebased GDP figure would help to attract foreign direct investors into the country as they would see that the size of the economy had increased tremendously.

He, however, said the government needed to address infrastructure deficit to enable the country to grow at the rate it should.

Mr. Femi Ademola of the Research Intelligence Unit of BGL Plc said the new GDP figure had increased Nigeria’s per capita income from $1,500 in 2012 to $2,999.41, and this had classified the nation as a lower middle class income country.

“There is no direct impact on Nigerian individually, especially the man on the street. On the long run, however, the economic benefits of improved national statistics would be felt by everybody through increase in job creation, wages and working conditions, and in tax revenue from increased economic activities,” he said.