In April 2014, the National Bureau of Statistics, Nigeria, under the government of Nigeria, announced changes to the way it calculated GDP, changing the calculation to more accurately reflect current prices and market structure, thus giving more weight to Nollywood and mobile phone services that had grown a lot recently. As a result, Nigeria's estimate of its GDP increased by 89%, moving it from Africa's second biggest economy (after South Africa) to the biggest economy. These changes were known as the 2014 Nigeria GDP rebasing or simply the rebasing.
Changes made
Change of base year
The base year for calculation (including information on the market structure) was updated from 1990 to 2010. This was a fairly huge increment in base year; for comparison, the 2010 Ghana GDP rebasing updated the base year from 1993 to 2006, and the 2015 India GDP rebasing updated the base year from 2004/05 to 2011/12.
Change of data sources
GDP can be estimated through three methods: production, income, and expenditure. GDP calculations in Nigeria were previously done purely through the production method. The new data included results on income and expenditure, allowing for better reconciliation of data.
Effect on data series
Overall estimate of economy size increased significantly
The estimate of total GDP of Nigeria increased from 42.4 trillion naira (US$270 billion at exchange rates) to 80.2 trillion naira (US$510 billion at exchange rates), an 89% increase. This was similar to the result of rebasings in other African economies around that time, including Kenya, Uganda, Tanzania, and Zambia, and also matched the result of the 2010 Ghana GDP rebasing. It contrasted with the experience of the 2015 India GDP rebasing, where the overall estimate of the size of the economy was slightly reduced.
Nigeria's GDP increase far exceeded the expectations of analysts who had forecast an increase of between 40 and 60 per cent following the rebasing exercise.
As a result of the size change, the stock market capitalization to GDP ratio estimate reduced from 33% to 18% (for comparison, the corresponding ratio for South Africa at the time was 270%). Nigeria's finance minister Ngozi Okonjo-Iweala believed this would be interesting to foreign investors interested in the upside potential of emerging markets.
Sectoral composition shifted toward services and away from oil
As a result of this change, more weight was given in the new series to services, with the role of Nollywood (the film industry) and mobile phones increasing significantly. In particular, the telecom industry accounting for more than a quarter of the increase in the GDP estimate. After telecoms, the biggest contributor to the upward shift was traders; this was achieved by increasing the sample of firms from which GDP data are calculated by a factor of about ten. The fraction of the economy devoted to oil reduced by more than half to 14%.
In a report for the Brookings Institution on the rebasing in Nigeria as well as similar rebasings in Kenya, Tanzania, Uganda, and Zambia, Amadou Sy noted that the rebasings highlighted the problems of relying on outdated data ad calculation methods that was prevalent prior to the rebasings, and also that the rebasings showed the importance and growth of the services sector. Sy called this a structural transformation in African economies that needed to be understood better. The increase in the size of the services sector was also noticed in the 2010 Ghana GDP rebasing. In contrast, the 2015 India GDP rebasing saw a downward correction in the size of the services sector and a corresponding upward correction in the size of industry.
See also
References
- ^ Coyle, Diane (22 September 2015). GDP: A Brief but Affectionate History. ISBN 9781400873630. Retrieved October 17, 2017.
- ^ Blas, Javier; Wallis, William (April 7, 2014). "Nigeria almost doubles GDP in recalculation". Financial Times. Retrieved October 17, 2017.
- ^ "Step change. Revised figures show that Nigeria is Africa's largest economy". The Economist. April 12, 2014. Retrieved October 17, 2017.
- ^ Sy, Amadou (March 3, 2015). "Are African countries rebasing GDP in 2014 finding evidence of structural transformation?". Brookings Institution. Retrieved October 17, 2017.
- ^ Mezue, Bryan (April 9, 2014). "Nigeria's GDP Just Doubled on Paper: What It Means in Practice". Harvard Business Review. Retrieved November 19, 2017.
- ^ "News Brief: New Series of the Gross Domestic Product (GDP) Estimates" (PDF). Ghana Statistical Service. November 3, 2010. Archived from the original (PDF) on January 7, 2018. Retrieved November 18, 2017.
- ^ Jerven, Morten; Duncan, Magnus Ebo (August 1, 2012). "Revising GDP estimates in Sub-Saharan Africa: Lessons from Ghana" (PDF). The African Statistical Journal. 15. Retrieved October 16, 2017.
- Worstall, Tim (April 18, 2015). "India's Change In GDP Calculation Method Seems Highly Sensible". Forbes. Retrieved October 15, 2017.
- "Three Approaches of Calculating GDP". Econtutorials. Retrieved November 19, 2017.
- "An Early Evaluation of India's GDP Rebasing". CEICdata. February 17, 2015. Retrieved October 21, 2017.
- ^ David Keohane (February 3, 2015). "India: GDP growth rate up, confidence in statistics down?". Financial Times. Retrieved October 21, 2017.