The long-awaited revisions to Nigeria’s gross domestic product data have been a drawn-out saga. Nevertheless, whenever the revised data are released, they are likely to show that Africa’s most populous nation and largest oil producer have already claimed South Africa’s crown as the continent’s largest economy.
Most developed countries overhaul their GDP calculations every five years to reflect changes in output and consumption. This is particularly true in emerging economies, where measurement techniques tend to be less developed. But Nigeria's economic output data is still calculated using 1990 as the base year, which fails to capture booming sectors like mobile telecommunications and the “Nollywood” film industry that have emerged since then.
The National Bureau of Statistics of Nigeria has been working since early 2012 to gather enough data to rebase Nigeria’s GDP. The original plan was to complete the revisions last year, but the finish date has repeatedly been postponed due to technical difficulties (i.e., low survey response rates). Yemi Kale, the statistician-general of the Federation, admits he underestimated the size of the task. The proposed revisions have now been delayed until 2014 -- hopefully in the first half of the year.
First, the base year for real GDP will be altered from 1990 to either 2010 or 2012, to capture structural shifts in the economy by giving more weight to sectors such as retail and telecoms. Agriculture, which last year made up 40 percent of Nigeria’s GDP, is likely to decrease in influence, with telecoms and entertainment sectors given larger weightings. The second change is the use of improved methodology and surveying techniques, according to Capital Economics African economist Shilan Shah.
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Africa’s second-largest economy has been one of the continent’s most consistent performers in recent years, with annual gross domestic product increases of between 5 percent and 8 percent since 2003. In the first quarter of this year, growth was 6.56 percent.
While the petroleum sector’s contribution declined due to legislative uncertainty and industrial scale theft of crude oil, the non-oil sectors remained a strong driver.
Early estimates suggest that, as a result of the revisions, measured GDP in Nigeria ($258 billion in 2012) could increase by up to 40 percent in nominal terms. Even taking a conservative estimate of a 20 percent increase, Nigerian GDP would overtake South Africa’s by 2014, according to Shah.
While this seems enormous, there have been some notable recent examples of changes to GDP data showing huge underestimations of the size of an economy.
For instance, following revisions in 2010, Ghana’s measured nominal GDP was shown to be 60 percent bigger than initially thought, Shah said in a research note. Similarly, revisions to Turkish nominal GDP in 2008 revealed a 30 percent increase.
On the positive side, the rebasing will help Nigeria narrow the budget deficit and public debt ratios as a share of GDP. However, the revision would reduce the relative size of Nigeria’s current account surplus.
“Given the current account surplus has been in decline for some time, this will raise further questions about the effectiveness of the management of oil revenues,” Shah said.