Nigeria, Africa’s New Economic Giant

Nigeria, Africa’s New Economic Giant
Nigeria is also Africa’s largest oil producer

AFRICANGLOBE – It is not like we did not know it was going to happen. When Ghana rebased in 2010, it doubled its GDP, so it is hardly surprising that Nigeria, having experienced a boom decade and not having rebased since 1994 or so, would have great growth numbers.

Nigeria’s rebasing puts the country’s 2013 GDP at US$ 509.9bn (about ZAR 5 trillion,) compared with SA’s GDP of US$ 370.3bn. This effectively leapfrogs Nigeria to the position of most prosperous country in Africa, and displaces South Africa from that title for the first time.

Simply put, GDP is a figure calculated by statisticians within certain parameters, and uses data to estimate the value of all sectors within a country. GDP is basically the market value of the recognized goods and services produced in a country for a particular period of time, normally a year.

But can we trust these numbers? Economist Morten Jerven, writing for African Arguments, asks the question, “How good are the numbers actually?” And his own answer to the question, “Not very good, but adequate.” He elaborates, “The new GDP number is made up from lot of guesses,” adding, “It is better than the previous guess, but it still has a big margin of error attached to it.”

The previous GDP figures for Nigeria did not include mobile phones and the local film industry (aka ‘Nollywood,’) for example. These numbers have been added in this time. It had also previously been assumed that 75% of the labour force was employed in agriculture, which was wrong.

The informal economy, in which many Nigerians work to survive, has now been included in the numbers, although it only includes those with fixed premises. The street vendors who sell from car to car are not included: there seems to be no way yet of accurately counting them. Nonetheless, after telecoms, trading makes up the biggest share of the revision.

The service industry is also estimated to have grown, from half of industrial value added, to a figure that places it as larger than agriculture and industry combined, some 50% of the total GDP. Jerven finds this worrying, saying, “For most countries (apart from India,) the service sector has been a poor engine of growth.

Secondly, the quality of numbers on production, value and intermediate consumption on small and medium scale services is very poor.” This may also come as a surprise to those who thought Nigeria was an oil-based economy.

The real issue, echoed by many South African economists, is poverty and inequality. Nigeria is known for its huge wealth gap, with a military-based power-elite controlling oil, a very small middle class population and the majority of people living below the poverty line. In 2013, the Economist Intelligence Unit rated Nigeria as the worst place for a child to be born, out of 80 countries surveyed. So although the Nigerian pie is bigger, there are many more who need to eat from it.

Nigeria’s strength is in its huge population. “Size matters,” says Oscar Onyema, chief executive of the Nigerian Stock Exchange. “Size means you will be able to do… projects you would not have considered in smaller economies.”

For Kenyan industrialist Manu Chandaria, the chairman of Comcraft Group, which sells ironware, including corrugated roofs and pots and pans, Nigeria has massive potential. “Nigeria is just colossal,” he told the Reuters Africa Summit in Nairobi in April 2014. “Everybody needs to eat. Everybody needs shelter. Anybody who brings in money needs a pot to cook in, they need a roof – so we are in the right place.”

The fear amongst local commentators is that investors who may have preferred to invest in South Africa would now be more inclined to put their dollars into Nigeria. But there are other factors to take into account. South Africa, with its large middle class and lower poverty figures, is considered a more advanced consumer society, with superior infrastructure and better financial systems.

At the World Economic Forum’s 2013-14 global competitiveness report, Nigeria was ranked 120th, whereas South Africa stood at 53rd out of 148 countries. But if Nigeria can build its middle class, by improving infrastructure and creating a more diversified economy, it may be able to realise its full potential as a mass market.

If anything, Nigeria’s crown of ‘largest economy in Africa’ could be good for South Africa, says Rob Davies, SA’s Minister of Trade and Industry. “It’s a good thing because our future is inextricably linked to that of the African continent,” says Davies, adding, “Very concretely and very directly, we are involved in a number of potential projects with Nigeria, resulting from Nigeria’s attempts to industrialise, which could be of mutual benefit to both our countries.”

For example, South Africa is helping Nigeria to develop its automotive industry. Davies explains, “They are launching an automotive programme and we are discussing with them the possibility of an agreement which would support the development of their automotive programme,” adding, “South Africa is already among the largest foreign investors in Nigeria.”

Other South African analysts believe that what’s good for Nigeria is good for Africa, and indirectly that South Africa can benefit, especially if good trade channels are maintained between the two countries.

Morten Jerven, author of “Poor Numbers: How We Are Misled by African Development Statistics and What to Do about It” (Cornell University Press) provides a summary, “The bottom line is that Africa and Nigeria are no longer the bottom billion. There is growth, and while investors, journalists, scholars and others want to know how much and how fast, the short answer is that we do not know… The gaps in information are too large to be filled overnight. GDP in Nigeria doubled on a Sunday afternoon and that is an accurate diagnosis of our knowledge problem.”

The problem of accurate figures will challenge Africa until they are resolved, but growing markets will no doubt help this to be corrected and that this will influence investment and further growth. Ironically, growth will mean more funds for more data, and more accurate data at that.

The big question, though, is whether Nigeria will enter that group of twenty finance ministers and central bank governors known as the G20. This is an extremely powerful organisation, given G20 members represent some 85.5% of global GDP, over 75% of global trade, and two-thirds of the world’s population.

Government leaders and analysts are now calling for Nigeria’s inclusion. Ellis Mnyandu, editor of Business Report, says the SA Trade & Industries minister is pushing for Nigeria’s inclusion in the G20 and other influential global bodies, because it would give Africa a bigger voice.

With Africa’s star rising, it only makes sense that the continent has greater influence in those organisations that set the global agenda.


By: Jon Pienaar