The previous base year of 1990 has become outdated due to changes in the structure of the economy. The National Bureau of Statistics (NBS) now estimates Nigeria’s GDP at 80.22 trillion naira in 2013 compared to 42.4 trillion naira prior to the rebasing.
This translates into nominal GDP of 509.9 billion dollars last year compared to Statistics South Africa’s reading of 323 billion rand for the South African economy during the same period. These revised figures make Nigeria the world’s 26th largest economy, up from the 33rd position prior to the rebasing.
The number of economic activities surveyed for the purposes of the calculation of GDP increased to 46 from 33 previously. Better coverage (including of the informal sector), the inclusion of new industries, and methodological improvements led to significant increases in the contribution of the services sector, manufacturing, construction, and water & electricity. On the other hand, value added by the agricultural and the oil & gas sectors declined notably relative to GDP.
The agricultural sector contributed 35 per cent to GDP prior to rebasing, but is now only estimated to account for 22 per cent of GDP. Meanwhile, the services sector’s contribution increased from 29 per cent of GDP to 52 per cent of GDP, with the telecommunications sector rising from 0.9 per cent of GDP to 8.7per cent of GDP.
The manufacturing sector is now estimated to contribute 6.8 per cent to GDP, compared to just 1.9 per cent previously, while the oil and gas sector’s contribution has been revised down to 14.4 per cent from 32.4 per cent before rebasing. Final rebased GDP figures are scheduled to be released by June 2014. The NBS plans to rebase GDP figures every five years to ensure that estimates remain up-to-date.
South Africa’s National Treasury said after the rebasing that it welcomes the announcement that Nigeria is now the continent’s biggest economy as it gives concrete expression to the fact that Africa is indeed rising.
(READ MORE: Gordhan applauds growth in the Nigerian economy)
It said that the South African economy has been and will continue to benefit from faster economic growth in the rest of the continent and that South Africa will continue to nurture mutually beneficial trade and investment ties with Nigeria. There were no comments from Pretoria on South Africa’s own economic growth performance.
The most important benefit of the rebasing exercise is that it provides a more accurate estimate of the structure and value of goods produced in Nigeria. The fact that many industries are larger than previously thought may pique investors’ interest, while the psychological boost of overtaking South Africa could give the country more influence on the world stage.
Even so, Nigeria remains far behind South Africa when it comes to average wealth levels, quality of infrastructure, governance, and financial market development. And even though Nigeria’s GDP per capita is now estimated at close to 3,000 dollars from 1,700 dollars previously, poverty, inequality, and the inability of a large proportion of the population to benefit from economic growth, will remain key concerns.
(READ MORE: Challenges loom despite planned GDP rebase)
The opportunities offered by Nigeria’s large market and notable oil and gas reserves are partly offset by a treacherous operating environment. Oil theft and regulatory uncertainty continue to be a major problem for companies operating in Nigeria’s hydrocarbons sector.
Uncertainty about fiscal terms in the oil sector will persist, with the Petroleum Industry Bill (PIB) not likely to be approved before the elections in 2015. As a result, investment in the oil sector will continue to stagnate, and we expect to see only a 2 per cent increase in oil production during 2014 following two consecutive years of decline.
Meanwhile, in the non-oil sector, FDI interest in Nigeria should remain strong thanks to the large consumer market it offers, combined with the prospect of rising incomes. Total retail space of 180,000m2 is currently under development and set for completion within 36 months.
The United Nations expects the size of the Nigerian population to increase by 113.4 million (more than the combined populations of Ghana, Kenya, and Tanzania in 2010) between 2010 and 2030, and by 167.2 million between 2030 and 2050. Irrespective of poverty levels and the fairly challenging operating environment, the Nigerian market cannot be ignored simply due to the sheer size of it.
By Christie Viljoen - Senior Economist - NKC Independent Economists