The rebasing of Nigeria’s Gross Domestic Product, GDP, which is expected to increase the estimated size of Africa’s second largest economy by around 40 percent, is likely to be delayed until next year, the National Bureau of Statistics said yesterday.
The recalculation will enable Nigeria to join the ranks of middle-income countries and put it much closer in size to South Africa, the continent’s most developed economy. It will also make it an even bigger attraction for foreign investors seeking a slice of Africa’s fast growth rates.
But several deadlines to implement the changes have been missed, with the latest being the fourth quarter of this year.
“It is unlikely that even the target of the last quarter (this year) we will make it. I underestimated how much work needs to be done. I think everyone understands that this is very crucial and has to be done properly,” Director General of the National Bureau of Statistics, NBS, Yemi Kale said.
Most governments overhaul gross domestic product calculations about every five years to reflect changes in output and consumption, such as mobile phones and the Internet. Nigeria has not done so since 1990.
The rebasing is expected to add about 40 percent to Nigeria’s GDP, which would boost the economy of Africa’s top oil producer from roughly $250 billion to around $350 billion.
That brings it very close to South Africa’s currently $385 billion economy. And, with a growth rate of over six percent a year, compared with three percent in South Africa, Nigeria may eventually overtake its rival to seize the top spot.
Some economists warned that a sharp increase in the size of Nigeria’s economy will mean slower growth.
“You’d expect that the bigger the economy, the slower the growth but I don’t think it is as easy as that,” Kale said.
“Regardless of what our GDP is, we are still going to be small enough to produce even sharper growth rates.”
Sectors like telecommunications, construction, hotels and entertainment should get a greater weighting after rebasing but agriculture, which currently makes up around 40 percent of GDP and 60 percent of jobs, is likely to decrease in influence.
“Growth in agriculture is largely subsistence, largely labour intensive, so there is a limit to how much you can grow. We know that capital intensive technology probably generates more output than labour intensive technology,” Kale said.
He said the oil and gas sector, which contributes around 80 percent of government revenues, is expected to maintain a similar weighting of around 15 percent.
A larger estimated economy would most likely boost interest in Nigerian stocks, especially goods companies looking to unlock the consumer potential of Africa’s most populous country.
It will also improve Nigeria’s debt to GDP ratio, currently around 16 percent. But Nigeria’s tax revenues, seen as woeful for a country of this size, will look even smaller.
Foreign aid donors may also find it harder to justify giving support to Nigeria if it becomes a middle-income state.
Despite roaring growth rates, 61 percent of Nigerians – or 100 million people – still live in absolute poverty.
“It is very clear that middle-income is growing, it is very clear that consumption is improving. The major problem to ensure that this is broad based,” Kale said.