Nigeria’s economy is about to grow 40% in one day

October 29, 2013
October 29, 2013

South Africa could be ousted as Sub-Saharan Africa’s largest economy when Nigeria publishes its revised GDP figures in December. By using more up-to-date economic data, Nigera’s GDP is expected to show a 40% increase.

Since last year, government workers have been traversing the country in order to collect data and convince local businesses to relinquish information about their financial activity. The new figure will include previously unaccounted for sectors like telecommunications and the country’s growing film industry, “Nollywood.”

Countries normally rebase their GDP, as in change how sectors are weighted, every five years to reflect changes in the economy. But African countries have only recently started to update their calculations. In the span of a day, Ghana’s GDP expanded 60% in 2010 when it rebased its GDP; Gambia and Guinea-Bissau saw their economies double in size (paywall) when they did revisions. As a comparison, when the US upgraded how it calculates GDP earlier this year it added 3.6% to its economy.

The dramatic statistical changes are proof of how poor economic data are in a region that’s increasingly important to investors while other emerging economies slow. Morten Jerven, a professor at Simon Fraser University, says national statistics on economic production throughout Africa might be off by as much as 50%.

For Nigeria, the move should lower its public debt to GDP ratio to between 10.5% and 14.5%, down from 17.3% in 2011, and shrink its federal budget deficit. It’s likely to become classified as a middle-income country as well.

Yet there are also drawbacks to these changes. A lower deficit could encourage government spending, which could push the country back toward high inflation and becoming a middle-income country could take Nigeria out of the running for still critical foreign aid.

Moreover, those who criticize GDP as a measure of economic development say a bigger economy can distract investors and policy makers from paying attention to long-term problems. Nigeria has one of the highest deforestation rates in the world. A major crude oil exporter, it also ranked 40 out of 58 countries in a global ranking of government transparency and accountability in oil, gas and mining sectors.

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