On April 6 Nigeria completed the process of updating its GDP base year from 1990 to 2010 to give a better indication of the size and composition of its economy. Most governments overhaul GDP calculations every few years to reflect changes in output and consumption patterns such as innovations in telecommunication, financial services and internet usage, but Nigeria had not done so since 1990, suggesting that the previous GDP framework significantly underestimated economic activity.
The statistical revision resulted in a higher-than-expected 75% increase in Nigeria’s nominal GDP to US$451bn (in 2012). Due to the rebasing Nigeria jumps 10 places and is now the 28th largest economy in the world with a size similar to that of Austria and Taiwan. Nigeria also overtakes South Africa as the largest economy in Africa in terms of nominal GDP, albeit it has to be considered that its population is more than three times that of South Africa. This means that even after the GDP rebasing Nigeria’s GDP per capita is only about one-third the size of South Africa’s.
The rebasing and rebenchmarking also change the structure of Nigeria’s economy. The number of industries measured by the statistics agency increases to 46 from 33 and the weighting of the different sectors changes. The share of agriculture in 2012 GDP decreases from 33% under the old framework to 22% in the new framework. Similarly, the share of the hydrocarbon sector declines from 37% to 16%. Furthermore, the size of the service sector nearly doubles from 26% to 51%. Within the service sector, telecommunication services increase tenfold from only 0.8% of total GDP to more than 8% in the new figures. Entertainment services (including the booming Nollywood film industry) are estimated at 1% of nominal GDP after the rebasing, while the sub sector was unaccounted for previously.
Overall, following the rebasing Nigeria’s economic structure appears much more diversified and less dependent on primary commodities than before, although the hydrocarbon sector and related downstream sectors still account for a large share of GDP.
The higher nominal GDP naturally changes all economic variables that are expressed in terms of GDP. This bodes well for Nigeria’s fiscal accounts, as it reduces the fiscal deficit and the public debt level as a percentage of GDP. The 2012 public debt level, for example, decreases from 19% of GDP to 11% of GDP due to the rebasing. At the same time, it lowers the external surpluses and decreases Nigeria’s net external creditor position when compared to the size of the economy.
Becoming the number one economy in Africa crowns Nigeria’s strong economic performance
Nigeria has been among the world’s fastest growing economies since the start of the new millennium. Its growth averaged at around 7% year-on-year over the past decade, compared with 3% in South Africa. The strong performance has been enabled by increased macroeconomic stability – prudent monetary policy succeeded in keeping the naira stable and recently in bringing inflation to single digits – as well as high prices for Nigeria’s primary export good, oil.