Nigeria: GDP revision supersized economy to Africa’s biggest, still risks and challenges loom
On 6 April, Nigeria’s GDP was ‘rebased’ by the National Bureau of Statistics, which added 89% to its GDP, now worth 510 billion USD. Overnight Nigeria got promoted to Africa’s biggest economy before South Africa.
Nevertheless, GDP per capita of the most populated country of the African continent remains more than two times smaller than that of its South African peer. Nigeria’s GDP was previously based on the shape of its economy in 1990 and with the revision base-year 2010 was introduced, giving weight to fast-growing sectors that gained enormous importance over the past two decades.
Especially the service sector, which now accounts for 52.3% of GDP, is better covered and is predominantly driven by telecommunication, banking, information and technical services, wholesale and retail but also film and music industry.
On the flipside, the share of manufacturing (6.8% of GDP) and agriculture (dropped from 35% to 22%) remains severely underdeveloped and creates dependency on imported consumer goods. Moreover, export receipts are deeply oil-dependent with non-oil exports only making up for 5% of total goods exports.
Impact on country risk
The supersized figures will provide a short term boost to investments as new direct opportunities are being highlighted. On the other hand, new space for public borrowing is created by the enlarged GDP as total public debt to GDP will drop to 11% from an already modest 19%. However, data revision in no way alters the significant economic and social challenges Nigeria is facing.
Poverty is widespread and growing, ranking Nigeria 153rd out of 187 countries on the UN Human development Index, and youth unemployment jumped over 50%. Lack of development and inequality – particularly between the prosperous south and the poor north – have been feeding the violent Boko Haram conflict in the north-east that has been sprawling geographically towards the Middle Belt (including the federal capital Abuja).
Moreover, corruption, lack of legislative progress and structural reforms cause a problematic shortfall of investment incentives, especially in the oil sector where production losses are huge, keeping economic performance below capacity.
With charged general elections looming in 2015, the risk for political destabilisation and political violence has increased considerably and therefore, the supersized GDP will currently not encourage Credendo group to upgrade Nigeria’s MLT political risk classification (5/7).
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Louise Van Cauwenbergh , Credendo Group