Africa Exco Finance

New GDP numbers make Nigeria the largest economy in Africa

Nigerian flag

by Gary Coleman – May 15, 2014

Recently, the Nigerian government announced new GDP numbers that now make it the largest economy in Africa. Having overhauled economic data for the first time in two decades, the GDP figure rose by 89 percent from 2003 to 2010. It’s a number that caught the attention of the world and was much discussed at the World Economic Forum (WEF) on Africa, held last week in Nigeria’s capital city of Abuja.

But is GDP really the best measure of success? If you listened to the debate at WEF, the answer is, probably not. Because when you look behind a remarkable number like that, you can see there are many factors not addressed by this figure—factors that provide clues as to how the economy is really unfolding and how it is impacting quality of life.

One factor that was repeatedly touched on at the event was infrastructure. From the opening address from China’s Premier Li Keqiang to a range of sessions on inclusive growth and job creation, building up basic infrastructure was identified as a key step to not only improving local economies but also building intra-African commerce overall. “Prosperity requires trade,” said the Rwandan minister of finance and economic planning at a WEF Africa session. And that requires strong infrastructure.

But only one country in Africa ranks in the top 50 on the WEF Competitiveness Index’s infrastructure indicator (Mauritius at 50, out of 148 countries). Just in Nigeria, which, according to the World Bank, has “relatively advanced power, road, rail, and ICT networks,” it is estimated that almost $14.2 billion per year will need to be spent over the next decade—or about 12 percent of GDP—to address infrastructure challenges. Right now Nigeria spends about $5.9 billion per year.

Clearly infrastructure numbers like these can tell a different story than that told by a burgeoning GDP growth rate. Numbers like, “7 out of 10 Africans do not have access to electricity”  can tell a story that is much more compelling. But even this number may need more context in order to get down to the reality on the ground. As the minister of finance of South Africa said while participating on a panel at WEF Africa, “You can have all the electricity in the world, [but] if consumers can’t afford to pay for it, there’s no point in having all that power.”

So what may be a more effective way to measure Nigeria’s success—or any other countries’, for that matter—is to examine numbers that are non-economic. In contrast to GDP, a rank from the Social Progress Index (SPI)—which measures 132 countries and covers over 90 percent of the world’s population—considers non-economic areas, such as clean water access, education and health as well as access to opportunity via personal rights and equal treatment. In contrast to their number-one GDP position on the continent, Nigeria, on the 2014 SPI, is second from last among the African emerging market economies the index measures.

This does not diminish, however, the amazing growth that Nigeria or Africa has achieved in recent years and it’s not to say that GDP doesn’t matter. Because it does. If Nigeria wants to attract the kind of investment that can spur improved infrastructure—and a higher ranking on the SPI—getting the world’s attention can never hurt. And as Africa’s now largest economy, Nigeria’s numbers do just that.

About the author

David Graham

Leave a Comment