Nigeria’s economy will soon overtake South Africa’s
There was a great deal of misery in South Africa after the national football team lost 3-1 to Nigeria in Cape Town on January 20th. The defeat means the host nation did not qualify for the knock-out stages of this year’s African Nations Cup. Sports minister Fikile Mbalula spoke of a “huge crisis” in football and the need for a radical overhaul of how the sport is organised. Now is probably not the time to remind South African football fans that it is only a game.
Nigeria is about to deliver another blow to South African pride. Its statistics office will soon publish long-delayed revisions to its estimate of the size of the economy. As the score stands now, Nigeria is second to South Africa as the continent’s economic big shot. Its GDP at current prices was $292 billion last year, according to the IMF, compared with $354 billion for South Africa’s. But that will change. Bigwigs in Abuja, Nigeria’s capital, have dropped heavy hints that revised figures will put Nigeria comfortably into first place. Charlie Robertson, chief economist of Renaissance Capital, said that Nigeria’s GDP figure could be revised up by as much as 60%.
Why such a big upgrade? An economy’s growth rate in inflation-adjusted terms is typically measured by reference to prices in a base year. In Nigeria the reference year is 1990; real GDP for subsequent years is expressed as if prices had remained constant since then. To tot up an estimate of GDP growth, its number-crunchers add together growth estimates from each sector of the economy, ie, farming, manufacturing, construction and services. The weight they give to each part depends on its importance to the economy in the base year.
But as time passes those weights become less relevant. A snapshot of the economy in 1990 gives little or no weight to mobile telephony or other new and fast-growing industries. Hence the IMF recommends that the base year is updated at least every five years. Nigeria has waited too long: the new figures will use 2008 as the reference year. But at least an opportunity is being taken to improve the gathering of statistics in other ways. For instance experts from the World Bank are said to be advising on how best to capture the output of small companies.
An upgrade of 60% would not be unprecedented. In 2010 Ghana’s GDP was bumped up by this amount when its figures were rebased. It is likely that the figures for a lot of other African countries are also understated. A survey of 23 African countries by Morten Jerven of the Simon Fraser University in Vancouver, Canada, found only two (Lesotho and Namibia) that were confident their GDP estimates covered the whole economy. Fully 18 countries thought their GDP fell short of the true number.