What Nigeria’s Rapid Growth Says About Economic Analysis

Nigeria is one of Africa’s leading powers — an significant achievement in a continent of 54 nations and over 1 billion people, almost 16 percent of whom are Nigerian nationals. With Africa’s largest economy as of 2014, and now the 20th largest one in the world, it has been classified as an emerging global power for its impressive speed of development.

As The Atlantic observes, this turnaround has massive implications for both the country and the developing world at large.

Nigeria’s overnight transformation raises two distinct but interconnected questions. First: What do we miss about countries when we don’t have accurate economic data about them—and what are the practical implications of that blindness?

In computing its GDP all these years, Nigeria, incredibly, wasn’t factoring in booming sectors like film and telecommunications. The Nigerian movie industry, Nollywood, generates nearly $600 million a year and employs more than a million people, making it the country’s second-largest employer after agriculture. As for the telecom industry, consider that there are now some 120 million mobile-phone subscribers in Nigeria, out of a population of 170 million. Nigeria and South Africa are the largest mobile markets in sub-Saharan Africa, and cell-phone use has been exploding in the country.

The following chart shows just how dramatically the country’s economic size and diversity increases once sectors are taken into account.

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The economy almost doubles!

This revelation has led many analysts to revise previously grim socioeconomic trajectories of other poor nations, in Africa and beyond.

Cases like Nigeria’s indicate that “Africa as a whole probably is not as poor as we’ve long thought,” the economist Diane Coyle writes in her great (and well-timed) new book, GDP: A Brief but Affectionate History. “In many African, Asian, and Latin American economies, the GDP calculations take no account of phenomena such as globalization, or the mobile phone revolution in the developing world…. There are fundamental weaknesses with the collection of basic statistics such as what businesses there are, what they are selling, or what goods and services households spend their incomes on. The surveys needed to collect this information are carried out only infrequently…. [O]ne estimate suggests that for twenty years sub-Saharan African economies have been growing three times faster than suggested by the ‘official’ data.”

And these economic indicators are not mere abstractions—they have real-world consequences. Coyle notes that when Ghana rebased in 2010, its GDP increased by 60 percent, transforming it instantly from a “low-income” country into a “low-middle-income” country. Aid organizations use these categories to determine levels of financial assistance. John Campbell at the Council on Foreign Relations points out that newly rebased Nigeria may now clamor for membership in political groupings like the G-20, the BRICS, and even the U.N. Security Council.

On the flip side, while Nigeria and other developing nations might be wealthier overall than it once appeared, this assumes that GDP is an accurate measurement of prosperity.

 

South Africa’s GDP numbers are three times larger than Nigeria’s on a per capita basis. South Africa has a diverse, modern economy, while Nigeria remains heavily dependent on oil…. Further, World Bank president Jim Yong Kim included Nigeria with India, China, Bangladesh, and the Democratic Republic of the Congo as the countries with the largest number of people living in “extreme poverty”, defined as less than $1.25 per day. He went on to say that if you add to those five countries Indonesia, Pakistan, Tanzania, Ethiopia, and Kenya, those ten countries together account for 80 percent of the world’s total “extreme poor”.

In other words, while many developing countries have large, fast growing economies as far as GDP is concerned, whether that economic activity, size, and dynamism is translating into greater well being for average citizens is a different story. GDP does not take into account spending on healthcare, infrastructure, education, and other things that enhance people’s lives, and it is certainly a separate matter from rule of law, corruption, crime, and other detriments to both well being and full economic potential.

Of course, it was never designed to take into account such things, and in fairness there is usually some connection between high GDP and things like quality infrastructure, good governance, and the like — hence why the countries that excel in these areas also tend to have high GDP. But ultimately, the limited scope of GDP in determining a state’s general welfare and potential is why we should be cautious about looking too into raw size and growth.

With all that said, here is hoping that Nigeria manages to puts its new-found growth to good use. Given the large and burgeoning population, deeply entrenched corruption, and continued civil strife, it will be challenging, but the country has clearly proven that there is enough resourcefulness, innovation, and perseverance to make it happen.

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2 comments on “What Nigeria’s Rapid Growth Says About Economic Analysis

  1. It’s also going through talibanization in the north, plus I wonder to what extent census and other data account for the gap between rich and poor, which is exorbitant.

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