The Nigerian government is adjusting the way it measures GDP to account for the true size of the economy. Expected to be completed at the end of 2013, Nigeria will become the largest economy in Africa, surpassing South Africa. This will undoubtedly have an impact on the opportunity for MNCs and foreign investors seeking high growth rates in Africa. I cover the rebase and its implications for MNCs in my latest podcast with FSG’s CEO, Richard Leggett, following the publication of our recent Quarterly Market Review of Nigeria (Q3 2013).
As it currently stands, Nigeria’s GDP is based on figures from the 1990s which excludes the emergence of new industries such as the booming film industry, Nollywood, and the emergence of the telecommunications and services sectors. Nigeria’s economy is heavily driven by private consumption, and the GDP rebase will not affect this, but the rebase will fundamentally change the makeup of industries. The services sector is expected to comprise a much larger share of GDP as current figures indicate, as will wholesale and retail trade. The natural resource sector instead will decrease in terms of its share in GDP. Once the GDP is adjusted to reflect new realities, FSG expects the size of the economy to increase anywhere from 40% to 60%. Though the exact timing for the rebase remains unknown, Nigeria is expected to release preliminary numbers by the end of November 2013. Skeptics can rest assured; the fickle timeline for the rebase is likely caused by the complexity of collecting statistics and not an indication of the data’s reliability. Ghana’s GDP rebase in 2010, an exercise that increased the size of the economy by 60% overnight, took 8 years to be completed.
The imminent rebase is expected to also lead to an increase in government spending as improved debt ratios are likely to make Nigeria one of the least leveraged countries in the world. The spending is expected to go into the government’s priority sectors including infrastructure, housing, education, and healthcare. MNCs should monitor where new funds will be allocated to and take advantage of Nigeria’s improving economic indicators to make the case for resources and stay ahead of the competition as Nigeria becomes too large for companies around the world to ignore.