Nigeria becomes Africa's No. 1 economy, overtaking South Africa (+video)
Nigeria's GDP said to be more than $500 billion, nearly double the previous estimate. Its infrastructure and energy capability however lags far behind South Africa's.
Nigeriaâ€™s economy has overtaken South Africaâ€™s to become the continentâ€™s largest and the world's 26th most productive. The new calculation follows something called a "rebasing" that involves updating the size of a nation's gross domestic product.
The size of the West African nation's economy is now estimated at $509 billion, a virtual doubling from the $270 billion estimated before the rebasing, according Nigeria's chief statistician Yemi Kale, who heads the National Bureau of Statistics (NBS). He presented the new figures in the capital Abuja earlier this week.
â€śRebasing does not change what was already there, itâ€™s just about measuring better and more accurately,â€ť Mr. Kale said, â€śit does not mean that within 24 hours something miraculous has happened and we are better or worse off.â€ť
Nigeria is by far Africaâ€™s most populous nation with a population of 170 million and it is currently the continentâ€™s biggest oil producer, pumping more than two million barrels per day.
Rebasing an economy is defined by the United Nations as the "process of replacing present price structure (base year) to compile volume measures of GDP with a new or more recent base year."
A number of African nations, notably Ghana in 2010, have rebased their economies to discover they have capacities and resources not accounted for. Ghana's GDP was found to be $13 billion or 60 percent higher.Â
Essentially, GDP data is supposed give the most up-to-date snapshot of a countryâ€™s economy taking into account new sectors and the growth of others.
Most governments overhaul GDP calculations every few years to reflect changes in output and consumption, but Nigeria had not updated its national statistics in over two decades.
Nigeriaâ€™s elevation to top economic spot may give investors encouragement, analysts say, who before may have been wary about entering a riskier market. The NBS said this week that major industries in Nigeria have increased from 33 to 46.Â
Back in 1990, Nigeriaâ€™s last base year, the country had only one telecom operator with around 300,000 telephone lines. Nigeria now has over 120 million mobile phone subscribers with nearly a dozen operators. Nollywood â€“ Nigeriaâ€™s home-grown film industry â€“ did not exist in 1990 but is now contributing nearly 1.5 percent to the economy.
The revised or rebased figure also takes into account the large informal sector in Nigeria ranging from barbershops and tailors to cyber cafes.
A Standard Chartered Bank study released at the London-based Chatham House this year suggested Nigeria's rebasing could show a $400 million GDP, but the number of more than $500 billion announced this week far exceeded that estimate.Â
Some speculate that the rebasing of the economy was delayed in 2000 in order to pursue debt relief from the Paris Club and multilateral lenders. If Nigeria had become a middle-income country at that point, it would have been forced to forfeit its eligibility for access to aid and grants.
Ngozi Okonjo-Iweala, Nigeriaâ€™s minister of finance, said that despite the â€śmany theoriesâ€ť about the delay in rebasing, that the long decades of military rule were the main cause in preventing the establishment of a reliable statistics office. Nigeria returned to democracy in 1999.
While Nigeria has now reached the top economic spot on the continent, it still trails far behind South Africa in terms of basic infrastructure such as power supply.
At 4,000 megawatts, Nigeria's electricity output is a tenth of South Africa's for a population three times the size. â€śIt is one long step along a long road,â€ť said Gene Leon, the representative of the International Monetary Fund here.
While Nigeriaâ€™s economy has grown by at least 6 percent a year since 2006, according to the World Bank, the most recent poverty survey by the NBS shows that 61 percent of Nigerians were living on less than a dollar a day in 2010, up from 52 percent in 2004.
â€śWe have to work on building a social safety net to take care of those at the bottom of the ladder â€¦ inequality has been rising,â€ť Mr. Okonjo-Iweala acknowledged.
The rebasing comes as Nigerian President Goodluck Jonathan is struggling to crush a radical Muslim insurgency known as Boko Haram that has been raging in northeast Nigeria for over four years. Around 1,500 people have been killed this year, according to Amnesty International estimates.