Nigeria becomes the biggest economy in Africa after GDP revisions

Measuring the size of an economy is difficult on so many levels. Of course, there’s always the GDP debate, which asks about the best way to measure economic and social progress. But even measuring GDP is a huge challenge. Nigeria has just experienced a vast 89% increase in GDP having ‘rebased’ its figures.

The Economist explains rebasing: GDP is typically measured by reference to the shape of the economy in a “base” year. Statisticians sample businesses in different industries to see how fast they are growing. The weight they give to each sector depends on its importance to the economy in the base year. As time passes the figures become less and less accurate. Nigeria’s old GDP data relied on a hopelessly dated snapshot of its economy in 1990. The new figures (which have 2010 as the base year) give due weight to fast-growing industries such as mobile telecoms and film-making that have sprung up since then.

Indeed the telecoms industry accounts for more than a quarter of the upgrade in GDP. In 1990 the state telephone company had just a few hundred thousand fixed-line customers. There are now around 115m mobile-phone lines in use in Nigeria. Manufacturing also looms larger than it did. Factories that have opened since 1990 are being counted. As a result the sector’s share of the economy has grown from less than 2% of GDP to nearly 7%. Film-making had not shown up at all in the old figures; now the industry’s size is estimated at around 1.4% of GDP.

Nigeria’s number-crunchers have improved the gathering of statistics in other ways too. For instance, the old GDP figures were based solely on estimates of output. The new ones are reconciled with separate surveys of spending and income. Perhaps the greatest advance is the inclusion of the activity of small businesses. The sample of firms from which the GDP data are calculated has increased tenfold to around 850,000 establishments, including many small ones. The informal shops that account for the bulk of retail and wholesale trade are now part of the GDP picture. Indeed after telecoms, trading makes up the biggest share of the revision.

In another article, we are reminded of the challenges Nigeria still faces.