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India.com
6 days ago
- Business
- India.com
Nigeria's Economy Swells Overnight After GDP Update – But What's Really Behind It?
New Delhi: It is not a magic, but it might look like it. Nigeria's economy just expanded by nearly a third on paper. The sudden growth did not come from a surge in exports or an oil windfall. It came from a long-overdue recalculation of how the country measures its Gross Domestic Product (GDP). After more than a decade, Nigeria's National Bureau of Statistics (NBS) has finally updated the base year it uses for its GDP figures, moving it from 2010 to 2019. The result? The official size of Nigeria's economy has jumped by around 30%, from $187.76 billion to $244 billion. That change has pushed the country's GDP to 372.82 trillion in local currency (naira). This recalibration is not a local event. It is significant for a continent where economic data is often outdated or incomplete. In Africa's economic rankings, the shift places Nigeria as the fourth-largest economy, behind South Africa, Egypt and Algeria. So What Changed? What prompted this major statistical shift? In simple terms, Nigeria updated its economic model to reflect changes in its economy over the past decade. The old base year did not account for entire sectors that now drive modern life, which has digital services, pensions and the informal labour force that employs the majority of Nigerians. 'It is the most comprehensive rebasing we have ever done. We are now measuring digital activity, pension fund administration and informal work, which over 90% of our population is part of,' said Adeyemi Adeniran, the head of the National Bureau of Statistics (NBS), during a press briefing in Abuja. Economist Michael Famoroti from Lagos-based Stears described the timing as 'necessary'. The rebasing, according to him, offers a clearer image of how Nigeria's economy has evolved. 'The structure is shifting. Agriculture still leads the pack in terms of output, and oil now contributes barely 5%,' he said. Benefits and Cautions More than numbers, it is about perception. One of the biggest side effects of the rebasing is a healthier-looking debt-to-GDP ratio. Before the change, Nigeria's public debt stood at 52% of the GDP. Now, it sits around 40%, right in line with the government's self-imposed threshold and below the 55% limit generally advised by the World Bank and International Monetary Fund (IMF). On paper, this is good news. But experts warn it could give a false sense of security. 'The improved ratio may make the government feel more comfortable taking on more debt. But the underlying issues have not disappeared. The debt is still there,' Famoroti said. Currency Struggles, Economic Realities While the updated GDP figure is a statistical win, Nigeria's currency tells a different story. Since President Bola Tinubu adjusted the exchange rate last year to attract investment and reflect market reality, the naira has lost over 70% of its value against the U.S. dollar. This devaluation cost Nigeria its title as Africa's largest economy in 2023. While helpful, the rebasing has not been enough to reclaim the top spot. Senegal Eyes Similar Move Amid Debt Woes Nigeria is not alone in revisiting its economic metrics. Last week, Senegal's finance ministry said it would also rebase its GDP for the first time since 2018. The announcement comes amid a financial scandal involving hidden debts that may exceed the country's current economic size. Bank of America analysts highlighted that, just like Nigeria, a rebasing could help improve Senegal's debt-to-GDP ratio and investor confidence provided the underlying economic performance stays strong. Since the announcement, Senegal's dollar bonds have shown signs of recovery. Still, the IMF has paused a planned bailout as it waits for the results of an investigation into billions of dollars in misreported debt. How Recalculation Works, And Why It Matters Think of GDP rebasing like updating a scale. If you measured your height with a stick from 10 years ago, you would miss some growth. Nigeria simply swapped out its 2010 measuring stick for a more recent 2019 version. To explain this, let us use a local example. Imagine tomatoes cost 5 naira per kilo in 2010 and 20 naira in 2020. Using 2010 as the base year, prices appear to have jumped 4x. But if you base it on 2015, when tomatoes cost 8 naira, then the price increase is just 2.5x. The shift in perspective can dramatically change how economic growth looks on paper. That is exactly what Nigeria did. By changing the base year, it removed several tough years from the calculation, years when the economy was under pressure. Now, the revised GDP reflects newer and faster-growing sectors and shows an economy that is broader and more modern. Nigeria's GDP rebasing gives the country a larger economy, stronger debt profile and a more accurate view of its current structure. But while the new numbers offer some relief, they do not erase the deeper challenges, ranging from currency instability to rising debt, that still demand careful attention.
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First Post
22-07-2025
- Business
- First Post
How to grow a nation's GDP by 30% overnight? Nigeria knows the answer
Nigeria's 2024 GDP now stands at N372.82tn ($244bn) at current prices, up from the $187.76bn estimated by the World Bank. The magic lies in the statistics read more Nigeria's President Bola Tinubu looks on after his swearing-in ceremony in Abuja, Nigeria, on May 29, 2023. Reuters File Nigeria's economy is about 30 per cent larger than previously thought after the west African nation updated the method by which GDP is calculated, the first rejigging of its statistical model in more than a decade. Nigeria's 2024 GDP now stands at N372.82tn ($244bn) at current prices, up from the $187.76bn estimated by the World Bank, after the country's National Bureau of Statistics changed the base year from 2010 to 2019. This was done to account for previously excluded sectors such as a booming digital services industry, pension funds and the informal labour market, which employs most Nigerian residents. STORY CONTINUES BELOW THIS AD Emerging market economies are encouraged by development experts to regularly rebase their economies to better capture the size of their national output and produce economic data reflective of their nascent economies, Financial Times reported. Nigeria, Africa's most populous nation, last rebased its GDP in 2014. At the time, the change allowed it to surpass South Africa to become continent's largest economy, although it lost that crown in 2023. Following the latest rebasing, Nigeria's economy remains the fourth largest on the continent, behind South Africa, Egypt and Algeria. 'The rebasing exercise was timely,' said Michael Famoroti, an economist and head of research at Lagos-based data company Stears. 'It's usually good to do these every 10 years or so especially in developing countries when the economy can change quite a bit. Add the emergence in the digital economy in that period and we needed an updated picture of the economy.' Famoroti said the exercise had shown that a change in the composition of the Nigerian economy was well under way, with agriculture firmly cementing its place as the largest contributor to national output and crude oil 'barely' contributing, at 5 per cent. The rebasing makes certain metrics such as the country's debt-to-GDP ratio seem healthier. Nigeria's debt-to-GDP ratio was 52 per cent before the model change, but now stands at about 40 per cent. That is the same level as government's self-imposed 40 per cent mark and below the 55 per cent level encouraged by the World Bank and the IMF. STORY CONTINUES BELOW THIS AD 'My worry is that the higher GDP figure will embolden the government to be laxer with its debt sustainability,' added. 'The debt-to-GDP ratio has already declined on the back of this. But that's only masking the situation unfortunately.' Adeyemi Adeniran, head of the NBS, described the rebasing as the 'most comprehensive' ever carried out by the bureau at a press briefing in the capital Abuja. 'Digital activities, pension fund administrators and the informal sector activities, where more than 90 per cent of Nigerians are employed, are now being measured,' he said. Nigeria lost its status as Africa's biggest economy in 2023 after President Bola Tinubu devalued its currency to reflect its true value and attract foreign investment. The naira has lost more than 70 per cent against the US dollar since the measure was taken. Last week, Senegal's finance ministry said it would soon rebase its GDP for the first time since 2018, in the midst of a scandal over hidden borrowing that threatens to push its debt burden well over the current size of its economy. STORY CONTINUES BELOW THIS AD 'Rebasing could improve debt/GDP along with continued strong economic performance,' Bank of America analysts said. 'As such, the authorities may find this option appealing to resolve issues around the debt stock.' Senegal's dollar bonds have rallied since the announcement. The West African country's GDP currently uses 2014 as a base year. Last year, the IMF suspended a bailout for Senegal after billions of dollars in debt were misreported. The fund is waiting for the results of an investigation into the scandal.
