Rebasing highlights Nigeria’s inequalities

Some time around the time of independence from Britain in 1960, Nigeria began to be referred to as the Giant of Africa, a promise that soon fizzled out in the wake of a civil war and a succession of military dictatorships.

Today Nigeria is once more hailing itself the continent’s new colossus. An update of its gross domestic product estimates places it as Africa’s biggest economy, overtaking Johnny-come-lately giant South Africa. The country has become a favourite among international investors including Temasek, Singapore’s state-owned investment company, and Atlas Mara, a venture of former Barclays chief executive Bob Diamond.

Much attention has been paid to the restructuring of the national economy revealed when the government nearly doubled estimates for GDP. The services sector is now thought to contribute half of GDP while agriculture and oil and gas have fallen significantly. Nollywood, the homegrown film industry, has finally been officially acknowledged. Manufacturing has also increased.

But this is only part of the story. Differences in poverty and unemployment rates across the country’s 36 states are remarkable. Ninety per cent of the total value of cash transactions in Nigeria are accounted for by only seven states, according to the central bank. Ali Mohammed Pate, a former health minister, points out that there is a 14-year gap between life expectancy across the country’s states. Average poverty rates range from 30 per cent in the wealthier south west, where cities such as Lagos are located, to 60 per cent in the impoverished north east.

When the rebasing is interpreted on a state-by-state basis, the disturbing gap between the country’s frontline states and its laggards – of which there are several – will become even more stark.

Consider Lagos, Nigeria’s biggest state economy and the hub of the banking and telecommunications industries, home to the country’s biggest port complex, and also its most populated state. Renaissance Capital, the investment bank, estimated that it contributed about 12 per cent of Nigeria’s GDP between 2009 and 2011. That statistic may have changed as a result of the rebasing exercise. But if not, it implies that the Lagos economy is worth $61bn. That is one-and-half times Kenya’s output, and larger than all but a handful of African countries.

In Kano, the commercial hub of northern Nigeria built around agriculture and manufacturing, rebasing indicates that the state economy rivals Ghana’s. This might make investors rethink the widespread view of the north as nothing more than a benighted haven for the Islamist terrorists of Boko Haram, blamed for this week’s deadly bomb attack in Abuja and the kidnap of more than 100 girls from a school in Borno state.

But securing a perch as Africa’s largest economy means little to the tens of millions struggling with routine power cuts, recurring fuel shortages, persistent unemployment, and rising inequality. The country’s Gini coefficient, a measure of income inequality, rose from 0.429 in 2004 to 0.447 in 2010. In GDP terms Nigeria may have shoved South Africa to second place, but the real achievement will lie in jumping up 32 places needed to meet South Africa on the UN Human Development Index.

The new GDP figures shine a spotlight on the alarming gap between Nigeria’s potential and its reality. It is, for example, a glaring anomaly that the world’s 26th largest economy has one of the lowest levels of electricity consumption per capita, well below the African average, and occupies 147th position on the World Bank’s Ease of Doing Business Index for 2014 – nine spots down from 2013. The percentage of the total population living below the poverty line is far higher than in the major emerging economies. Fewer than 10 per cent of Nigerians have any form of health insurance.

Nigeria needs to focus less on economic abstractions and more on improving the lives of ordinary citizens. Even if government claims that 1.6m jobs were created last year prove accurate – youth groups are not convinced, and are demanding evidence – this would hardly make a dent on an unemployment rate approaching 24 per cent. Forty thousand households can now claim conditional cash benefits, but this too is a drop in the ocean.

If Nigeria is to become a real economic giant, it needs to stand on its own two feet. At the moment, this colossus is shuffling along on feet of clay.

Tolu Ogunlesi