CEIC News@lert: Nigeria Becomes Largest Economy in Africa after GDP Rebase

April 30, 2014 - HIGHLIGHTS - On April 6th 2014, Nigeria’s National Bureau of Statistics (NBS) announced a major rebase of the country’s Gross Domestic Product (GDP), which valued the entire national output of the country in 2013 at NGN 80.2 trillion – an 89.2% increase from the previously reported figure of NGN 42.4 trillion. The reasons behind this huge difference in value include the change of base year for price calculation from 1990 to 2010, adoption of new internationally accepted methodologies, as well as improvements in data sources, in order to present a more accurate and up-to-date picture of the economy. The revisions from this rebasing exercise now make the Nigerian economy the largest in Africa, surpassing the previous leader South Africa. Real GDP is affected by the different base prices used for the calculation. Additionally, the weights attached to each sector of the economy are altered depending on the importance they have in each of the respective base years, which inevitably affects nominal GDP. In the case of Nigeria a drastic change of the economic structure of the country can be observed in the years after 1990 up until 2010. As an example the services sector grew rapidly during these years to represent 51.9% of the economy in 2013 compared to just 29% previously. Further disaggregating the services sector’s composition presents an interesting picture of which industries were under-estimated using the old methodology. The information and communication sector has grown enormously since 1990 due to the rapid development and usage of new technology. However, this wasn’t accounted for under the old methodology and from just 0.9% of total GDP in terms of 1990 prices, it now accounts for a 10.9% share. The same is true for finance and insurance activities rising from 1.7% of Nigerian GDP to 3.3%, representative of their increased importance globally in the past two decades. The manufacturing sector has also been largely revised and now represents 6.8% of total output compared to 1.9% according to the old methodology. The agriculture and mining & quarrying industries were the main drivers of the Nigerian economy in the past, but now the services sector has emerged as an almost equally important player. Changes in prices and weights attached to different sectors are some of the reasons for the huge positive difference between the new and old methodologies for calculating Nigerian GDP. Another one, as stated by the NBS, is the fact that the sample on which the data is based has increased tenfold from 85,733 establishments to 851,628. Also, the number of economic activities reported is now 46 compared to 33 previously. Reclassification of activities has also been done applying the latest standardized system of national accounts (SNA 2008) and the International Standard Industrial Classification of economic activities (ISIC Rev 4.0), compared to SNA 1993 and ISIC 3.1 previously. All of these initiatives make the Nigerian national accounts data now reported on CDM much more reliable and in line with the global standards of statistical reporting. Under the old methodology Nigeria was placed third on the continent in terms of its economic size, behind South Africa and Egypt. In contrast, in 2013 Nigeria’s revised nominal GDP totaled USD 515.4 billion, surpassing South Africa’s USD 351.5 billion. The fact that the recalculation of its GDP brings Nigeria to the top of Africa’s economies may seem incredible to outsiders. However, it must be admitted that the new estimation of the national output gives a better and more representative picture of the Nigerian economy. It is expected that by 2016 the GDP will be rebased again using 2015 as the base year. Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog
5th May 2014 CEIC News@lert: Nigeria Becomes Largest Economy in Africa after GDP Rebase