The Nigerian economy continued to expand at a sluggish rate in the third quarter of 2019 after state data agency, the National Bureau of Statistics (NBS), reported a 2.28 percent growth for the period.
Although that’s the fastest growth in four quarters, it’s unlikely to resonate with many Nigerians and here’s why.
The problem is that while the headline GDP seems to be expanding, it is actually shrinking in per capita terms.
GDP per capita is calculated by dividing total economic output (GDP) of a country by the number of people residing in the country.
This measure is more useful than the GDP because a country’s aggregate economic growth is not what matters most; rather it is whether the people living in a country are getting wealthier.
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GDP is like a speedometer: it tells you whether your economy is going faster or slower. As in cars, a speedometer is useful but doesn’t tell you everything you want to know. For example, it won’t tell you whether you are overheating, or about to run out of fuel.
In Nigeria, headline GDP is also like a speedometer especially since it doesn’t entirely capture the growth in the well-being of the people.
What does that is GDP per capita.
Nigeria’s GDP per capita has contracted every year since 2015 and that helps explain why despite the growth in headline GDP, Nigerians are getting poorer.
With GDP per capita of approximately $2000, the average Nigerian is poorer than the average South African whose average income is a little under $5000.
A recent Brookings report said Nigeria is now the poverty capital of the world, having surpassed India.
Economists say the economy will need to grow at least above population growth rate of about 3 percent to cut poverty rates and engender inclusive economic growth.
