Nigeria Is Number One


John O’Sullivan explains how, in just one weekend, Nigeria catapulted over South Africa to become the continent’s top economy:

On Saturday, April 5, South Africa was Africa’s largest economy. The IMF put its GDP at $354 billion last year, well ahead of its closest rival for the crown, Nigeria. By Sunday afternoon that had changed. Nigeria’s statistician-general announced that his country’s GDP for 2013 had been revised from 42.4 trillion naira to 80.2 trillion naira ($509 billion). The estimated income of the average Nigerian went from less than $1,500 a year to $2,688 in a trice. How can an economy grow by almost 90 percent overnight?

Nigeria has a deserved reputation for corruption, so a sceptic might think the doubling of its economy a result of fiddling the numbers. In fact it is the old numbers that are dodgy. An economy’s real growth rate is typically measured by reference to prices in a base year. In Nigeria the reference year for the old estimate of GDP was 1990. The IMF recommends that base years be updated at least every five years. Nigeria left it far too long; as a result, its old GDP figures were hopelessly inaccurate.

Uri Friedman notes that “in computing its GDP all these years, Nigeria, incredibly, wasn’t factoring in booming sectors like film and telecommunications”:

The Nigerian movie industry, Nollywood, generates nearly $600 million a year and employs more than a million people, making it the country’s second-largest employer after agriculture. As for the telecom industry, consider that there are now some 120 million mobile-phone subscribers in Nigeria, out of a population of 170 million. Nigeria and South Africa are the largest mobile markets in sub-Saharan Africa, and cell-phone use has been exploding in the country. Incorporating the film and telecom industries into Nigeria’s GDP made a huge difference in the services sector, rendering the country’s economy not just bigger but more diversified.

And that may be good news for developing countries around the world:

Cases like Nigeria’s indicate that “Africa as a whole probably is not as poor as we’ve long thought,” the economist Diane Coyle writes in her great (and well-timed) new book, GDP: A Brief but Affectionate History. “In many African, Asian, and Latin American economies, the GDP calculations take no account of phenomena such as globalization, or the mobile phone revolution in the developing world. … [O]ne estimate suggests that for twenty years sub-Saharan African economies have been growing three times faster than suggested by the ‘official’ data.”

A bright continent indeed. John Campbell wonders how this development will effect Nigeria’s international standing:

The claim of being Africa’s largest economy could bolster Nigeria’s chances of joining the G-20; at present, South Africa is the only African country in the club. But, if Nigeria joins, does South Africa leave? It might also strengthen Nigeria’s claim to a permanent seat on the UN Security Council, if and when Security Council enlargement becomes anything more than a hypothetical question. And what about the BRICS (the grouping of Brazil, Russia, India, China and South Africa)? South Africa’s membership was predicated on being Africa’s “largest economy.” Will Nigeria displace South Africa, or join South Africa?

(Photo: A Nigerian fan celebrates her team’s victory over Ethiopia after a 2014 World Cup qualifying match in Addis Ababa on on October 13, 2013. By Simon Maina/AFP/Getty Images)