Nigeria’s huge economy now even more attractive after rebasing

My latest sojourn in Nigeria, Africa’s biggest economy, has been nothing short of enlightening.

It was an opportunity to interact with the common man in the gargantuan Balogun Market in the commercial city of Lagos. Interaction with the bureaucrats in the well organised city of Abuja, the seat of the federal government of Nigeria, gives you an entirely different view of the nation’s growth milestones.

Nigeria is a nation of immensity. It has an estimated population of 177 million and ranks as the eighth most populated country in the world. This is really a massive growth in head count from a population of 45.2 million in 1960 making it home to a sixth of the African population.

The country’s new economic status as Africa’s biggest economy has continued to polarise economists, analysts and ordinary citizens in equal measure.

Some pundits have lauded the rebasing of the calculation of the country’s GDP while the others have equated it to an ego boosting exercise, with one commentator in the local media referring it to as “a journey from reality to vanity.”

However, talking to Nigerians from diverse walks of life, one gets a feeling that when John Godfrey Saxe wrote the poem, “The blind Men and the Elephant” had this great nation in mind. Different people describe the economy so differently.

The good

It is official: The rebased Nigerian GDP estimated at $509 billion makes the nation the biggest economy in Africa, ahead of South Africa’s $350 billion.

The GDP jumped by 89 per cent from the old figure. However, the most interesting part of the story is the main contributors to the GDP: telecommunications, music and Nollywood.

The truth is that rebasing the economy will not translate into more nairas in the pockets of the traders in the Balogun Market or the fishermen in Makoko slums, the famous dwellings built on water in Lagos, but there are a lot of benefits for a country that seeks to rebase its economy.

Rebasing of the GDP means simply replacing the old base year used for compiling the constant price estimates to a new and more recent base year in order to reflect a more current and fair estimate of the GDP size.

The IMF requires the exercise to be done after every five years but some African nations like Nigeria had maintained the same base year for over 20 years.

Rebasing the economy provides a fairly accurate estimate of the structure and value of goods produced in a country.

Foreign investors are particularly interested in the size of the economy where they intend to invest and its growth rate, as they are able to align their strategic plans with the expected growth in such markets. For instance, the rebased Nigerian economy had several surprises.

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Before the rebasing, the agricultural sector accounted for 35 per cent of the GDP, but is now estimated to be contributing only 22 per cent to the basket. The services sector’s contribution jumped from 29 per cent to 52 per cent of GDP. This is largely expected in Africa with the flourishing telecommunications sectors as well as other services sectors such as the banking.

Probably one of the biggest achievements of the Lagos state government must be the new five million square metres Eko Atlantic City. This City is to be built on reclaimed land from the Atlantic Ocean.

Eko Atlantic is expected to host about 250,000 people and be a workplace for more than 150,000 people. The government has marketed the mega development as one that will have ocean view areas, decent streets and a well-organised transport system, residential areas with social facilities, offices and shops.

The bad

If you had the opportunity to visit some cities in Nigeria and some in South Africa such as Cape Town or Johannesburg, you would surely agree with what some pessimists say — that Nigeria is way behind South Africa in terms of key economic development indicators such as the average individual wealth status and infrastructural advancement.

A better measure of the people’s wealth is a nation’s GDP per capita which effectively compares the GDP size with the population.

With the rebased economy, Nigeria’s GDP per capita is now estimated at about $3,000 a near twofold jump from the previous $1,700; compared with South Africa’s $11,600 in 2012. Like many African nations, the bulk of the population is still wallowing in poverty even if the country is home to Africa’s richest man Aliko Dangote.

The ugly

Like Kenya, the Abuja administration is having sleepless nights over the terrorist group Boko Haram. Terrorism is one of the major challenges that continue to face this great nation.

On the eve of April 14, about 270 schoolgirls were kidnapped from a boarding school in Northern Nigeria. The militant group Boko Haram torched the school and abducted the girls.

At the tail end of April, Abuja was still coming to terms with deaths occasioned by a bomb blast just a week to the 24th edition of the World Economic Forum on Africa, which took place from May 7 to 9.

Undoubtedly, the impact on the economy can be fast and furious. For instance, in Kenya, the tourism sector is paying dearly for the recent spate of terrorist attacks with employees losing jobs and the country losing much needed foreign currency inflows.

Forex experts say that the Kenya shilling remains vulnerable to insecurity precipitated by the sporadic terrorist attacks.

Like the six blind men, everyone will take home a totally different story of this populous nation. Irrespective of the inherent challenges, any serious foreign investor must attempt to get a slice of this huge pie.

Macharia Kihuro is a risk management practitioner in Nairobi.