Nigeria revealed rebased gross domestic product (GDP) figures for 2013 that showed an 89 percent jump in the estimated size of its economy.
The new rebased data show that the size of the Nigerian economy is now estimated at N80.3 trillion ($510 billion) for 2013, Yemi Kale, head of the National Bureau of Statistics (NBS), said at a press conference to announce the results in Abuja.
The new figures show that Nigeria has surpassed South Africa as the largest economy in Africa after overhauling its GDP data for the first time in two decades.
Rebasing/re-benchmarking of the national account series (GDP) is the process of replacing an old base year to compile volume measures of GDP with a new and more recent base year or price structure.
Economies are dynamic in nature: they grow, they shrink, add new sectors, new products and new technologies, and consumer behaviour and tastes change over time.
Until now, the GDP estimates for Nigeria have been based on a base year of 1990, which means that current GDP (say for example 2013 GDP) are expressed in terms of prices of goods and services in 1990.
The rebased figures showed a remarkable change in sector by sector contribution to the country’s GDP.
Hitherto, the agric sector used to be the dominant contributor to the Nigeria GDP but that has been diluted as other sectors such as finance services, construction, entertainment etc. have braced up their contribution to the economy.
The 2013 rebased figures showed the agric sector contributing 21.97 percent or N17.625 trillion ($112.26 billion) of the total N80.22 trillion ($510 billion). This compares with N14.71 trillion ($93.7 billion) in the old non-rebased estimates for 2013.
Nigeria’s agricultural output while seemingly impressive is actually underperforming its peers such as Argentina with its mostly subsistence method of cultivation and low productivity.
Almost half of the available arable land is uncultivated, while there is very little irrigation of fields or farmlands.
The government has come out with a plan, however, to change all that.
Nigeria plans to double agriculture’s share of banks’ credit to 10 percent in two years as it seeks to
cut food imports, agriculture minister Akinwunmi Adesina said recently at the World Economic Forum in Davos, Switzerland.
Loans to agriculture as a share of total credit rose to N320 billion ($2 billion) or 5 percent at the end of last year from less than 1 percent in 2011, Adesina said.
The Agriculture Ministry is partnering with the Nigeria Incentive-Based Risk-Sharing System for Agricultural Lending, a unit of the Central Bank of Nigeria (CBN), to provide credit guarantees to enable banks lend to farmers.
The government’s efforts to boost food supply by 20 million metric tons from 2011 to 2015 has seen the country’s food import bill drop by more than half to $5 billion from $11 billion two years ago.
Manufacturing
The manufacturing sector of the economy contributed 6.81 percent to the new GDP data equivalent to N5.47 trillion ($34.8 billion) out of the total 2013 GDP rebased estimate of N80.22 trillion ($510 billion).
This compares with N4.74 trillion ($30.2 billion) in the 2012 GDP figures.
The manufacturing sector has been receiving tremendous boost through Federal Government proactive policy formulations.
To boost local production of cement product, and increase its contribution to the GDP, the Ministry for Trade and Investment did not issue a single licence for the importation of cement in 2013, which has traditionally been a huge drain on Nigeria’s foreign exchange.
In addition, the ministry has also designed the Nigerian Automobile Industry Development Plan to provide the environment for the orderly development of the sector.
In 2013, the Trade and Investment Ministry entered into agreement with foreign investors to assemble automobiles in Nigeria with a view to boosting the contribution of manufacturing to the Nigeria’s GDP.
Other backwards integration policies have been formulated in the sugar, rice milling, wheat and tomato manufacturing sectors.
In spite of the rise in manufacturing’s contribution to GDP from about 4 percent in the non-rebased time series to 6.81 percent in the rebased data, Nigeria still underperforms its peer countries in manufacturing.
World Bank data show contribution of manufacturing sector to the GDP in Austria is 19 percent, while that of Thailand remains 34 percent. For South Africa, it is 12 percent, while it is 13 percent for Iran.
In Nigeria, manufacturers often groan under high inter-bank interest rate, which hovers between 18 and 30 percent. Lending is cheaper in microfinance banks but there is often a ceiling to the amount to be lent. Though the Bank of Industry (BoI) lends to critical players at an interest rate of between 6 and 10 percent, access is still cumbersome, say manufacturers.
The manufacturing sector has the capacity to create direct and indirect jobs. NBS data show that many of the jobs created in 2013 were from manufacturing, construction and financial intermediation. Increase in job generation from the manufacturing sector in 2013 was 63.20 percent. Analysts attribute this to waivers and incentives given to cement, sugar and manufacturing exporters within the period and say development of the sector will increase foreign exchange earnings, create wealth and develop subsidiary sectors.
Real Estate
The real estate sector contributed 8.01 percent to the Nigerian economy equivalent to N6.43 trillion ($40.9 billion) of the total rebased GDP estimate of N80.22 trillion ($510 billion).
The sector’s contribution to GDP while impressive has, however, happened without a comprehensive plan by government – until recently – to boost its growth.
Constraints to the sector’s growth include the notoriously problematic Land Use Act as well as difficulty in getting building permits and certificate of occupancy in many states.
The lack of easy transferability of titles and non-securitisation of mortgage loans where available and lack of mortgages in general are also a factor stunting the sector’s growth, in spite of Nigeria’s huge unmet demand for housing.
Nigeria’s Mortgage Refinance Company which will imitate the U.S.’s mortgage giant Fannie Mae hopes to plug some of these gaps.
It plans to sell bonds in the capital markets in a bid to curb the estimated 17 million- unit housing deficit.
The bonds when sold on the market by the new company (Nigeria Mortgage Refinance Co.) will provide long term financing to lenders that will help them extend more home loans.
It is expected that the new mortgage company will help put the economy on a higher trajectory of growth as home buyers are extended as much as 20 years maturities on mortgage loans; and as a result, 75000 new homes a year will be built, culminating in the creation of at least 300,000 jobs.
To finance the transaction, the Federal Mortgage Bank of Nigeria (FMBN) last year negotiated with two Chinese lenders for credit of as much as $6 billion.
With the establishment of the new company, a long term yield curve for pricing financial assets will finally be established with the potential of the creation of sophisticated financial instruments, such as mortgage backed securities (MBS) so that much more efficient capital deployment will be achieved.
The country’s rapid rate of urbanisation which the World Bank put at 51 percent in 2012, and the estimated 80 million living in the cities will spur the demand for housing and building materials, and, therefore, making the new refinancing scheme the right trajectory to providing shelter for the people.
The MRC model has been used in a number of countries to help stimulate the housing market, deepen home ownership and stimulate gross domestic product (GDP) growth.
In the United States the two housing-finance giants Fannie Mae and Freddie Mac have helped to expand home ownership in the US to historical highs, as well as engender wealth creation and jobs. Fannie Mae and Freddie Mac are estimated to own or have guaranteed about 60 percent of the U.S.’s $12 trillion mortgage market as at 2010.
Crude Petroleum and Natural Gas
Crude petroleum and natural gas which comes under the mining and quarrying s ector contributed 14.4 percent or N11.55 trillion ($73.56 billion) to the total 2013 rebased GDP.
This paints both a positive and negative picture for the Nigerian economy as while it shows that the economy is gradually weaning itself off its oil and gas dependence, there still remains a huge untapped potential in Nigerian oil and gas output that has remained stagnant for the past 5 years.
Nigeria’s oil output is stuck at around 2 million barrels a day, while gas production for NLNG export and domestic use has also been affected by a lack of investments in new NLNG trains and gas processing infrastructure.
The passage of the long delayed Petroleum Industry Bill (PIB) may help boost investments into the sector, even as Nigerian oil and gas firms are becoming increasingly active in the sector.
Domestic Nigerian firms such as Seplat, Oando, Seven Energy, Sahara oil, Brittani-U and Dangote Industries Limited are priming to invest in the oil and gas sector, buoyed by divestments from international oil companies (IOCs).
Stakeholders estimate that Shell, Total and Agip divested from Nigerian assets worth $6.5 billion in 2013.
Nigeria has the world’s ninth-largest proven gas reserves at 188 trillion cubic feet and potential gas reserves of 600 trillion cubic feet (TCF), however, much of it is flared.
At least $3 billion in revenue is lost annually due to flaring, according to the Petroleum Ministry, while a lack of gas for power plants stunted Nigeria’s double digit growth potential.
Telecommunications and Information Services
The telecommunications and information services sector contributed 8.68 percent to the Nigerian economy equivalent to N6.97 trillion ($44.3 billion) out of the total rebased GDP estimate of N80.22 trillion ($510 billion).
This compares with N364.4 billion ($2.3 billion) in the 2012 non-rebased GDP time series.
Telecommunications is the star performer in Nigeria’s rebased GDP figures.
The licensing of GSM companies earlier last decade has led to an unleashing of economic activity from e-commerce to mobile payments.
Nigeria currently has about 120 million mobile phone subscribers, with four major mobile service providers including MTN, Airtel, Globacom and Etisalat.
The potential in the sector can be seen in MTN which reported 2013 full year revenues of N793.6 billion for its Nigerian operations.
Nigeria had 56 million internet subscribers as at September 2013, according to data from the NCC, while international bandwidth brought by undersea cables, has increased about 26 times to more than 9,000 gigabits per second (9 terabits) over the past four years.
One market research firm suggests that Nigeria, which is Africa’s most populous country, will have almost tripled its online purchases in just three years to more than $1 billion by 2014.
This compares with South Africa, whose e-commerce sales were just 4 billion rand ($409 million) last year, according to research firm, World Wide Worx, estimates.
The number of payments in Nigeria made by mobile phone’s more than doubled to 2.4 million in the first half of 2012 from the same period a year earlier, while Internet payments rose 9.3 percent, according to data from the Central Bank of Nigeria (CBN).
The improving connectivity and increase in businesses done online is also spurring the need for data centers.
MainOne Cable Co Ltd., which operates an undersea cable connecting West Africa to Europe, plans to open a $25 million data center in Nigeria by June 2014.
The center will provide reliable Internet access and host information for clients such as banks, phone companies, government bodies, and a growing number of dot-com businesses, MainOne chief executive officer, Funke Opeke, said recently at the center’s construction site in Lagos.
Nigeria also plans to grow its mobile broadband access to 80 percent of the population and fixed broadband access to roughly 20 percent by the year 2017 from 4 percent now, according to the National Broadband Plan 2013-2018.
