Nigeria’s Economic Magic Trick


On April 6th, something fascinating happened. As if by a work of magic, Nigeria grew its GDP by 89% and suddenly became the largest economy in Africa. With this clever sleight of hand, Nigeria’s economy increased its worth from $263 to  $510 billion. South Africa, with a GDP of $370 billion has lost the top economic standing in Africa. How did Nigeria pull this off? Did they really construct over $200 billion of goods over night? Or did they rely on the types of magic tricks as displayed below? The actual reason for the phenomenon lies somewhere between reality and illusion. Let me go further into detail and explain what happened.

michael-scott-magic-tricks_2133841_GIFSoup.com
Nigeria’s Finance Minister right now

With a large population of 170 million people, Nigeria has been growing at a rapid pace of almost 7% over the past decade. Previously, the nation’s abundance in oil and other natural resources had been the main drivers of Nigerian growth. However, in recent years, Nigeria has drawn significant foreign investments and has witnessed thee emergence of new consumer-oriented sectors such as telecommunications, entertainment and banking. 20 years ago, Nigeria had only one phone operator and 300,000 telephone lines. Today, Nigeria has an entire telecommunication industry with over 120 million subscribers. Similarly, Nollywood, the Nigerian film industry, now produces the most movies in the world and makes up 1.4% of the country’s GDP. Finally, Nigeria’s services sector has grown by over 240% since 1990.

nigeria gdp chart

The reason for Nigeria’s overnight economic expansion is due to the way the Nigerian GDP was previously measured. For the past 24 years, Nigeria’s GDP calculation did not give much weight to these newly developed sectors. The new system of GDP calculation now incorporates the revenues from Nigeria’s new business sectors which had been overlooked before. This process of revising GDP calculation is referred to as rebasing. The IMF advises countries to go through this process every five years. However, many African countries such as Nigeria do not rebase on a consistent basis. International aid donors urge African nations to rebase regularly so that they can make more precise decisions regarding foreign aid.

nigeria GDP
Source: The Economist

The stastical illusion has not changed anything in reality . The important problems in the Nigerian economy still remain. Even though Nigeria’s economy is large, its people are still poor. Nigeria ranks 153rd out of 187 countries in the United Nation’s Human Development Index, unemployment is over 20% and GDP per capita is only $2700.Given that GDP per capita figure, South Africans are still twice as rich as Nigerians. Additionally, despite the emergence of new industries, the country still draws a majority of its revenues from oil and gas exports. Once again in contrast to South Africa, Nigeria has an underdeveloped infrastructure and has outbreaks of violence in certain parts of the country.

Goodluck Jonathan is the President of Nigeria. Despite having one of the funniest names I have ever heard, still has a lot of work to do. Yes, Nigeria has greatly grown over the past decade and has been the posterchild of rapidly growing African nations.  But in order to lift Nigeria to the upper echelons of nations, President Jonathan should seek to reduce corruption, incrase the efficiency of tax collection and reduce the bureacratic barriers to doing business in the country. As the cradle of mankind, Africa needs more nations such as Nigeria to rise above and help their people live in prosperity and security, something that they have been desperately seeking for many years.

“The work of Nigeria is not complete for as long as there is any one Nigerian who goes to bed on an empty stomach”
– Ibrahim Babangida

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