Opinion: Nigeria’s GDP – Punching below its weight

by Tunji Andrews

 Nigeria no longer stands on the that top ten list of “fastest growing countries”. Our 6.5% GDP fell way short of our African brothers like Libya (12.2%), Mozambique (8.2%), Rwanda (7.8%) and Ghana (7.6%), who all managed to make the top ten listings in 2012. For me this places a giant ‘F’ on our report sheet as a nation with massive growth and economic potential.

It is possible that at some point in time, you will have heard or read that the World Bank brandished Nigeria as one of the four fastest growing economies in the world. It is a very deceptive and callous feel-good factor that the World Bank placed upon us to feel we have had some progress in the last few years. Even though the unemployment and inflation rates still keep spiking with little growth in the agriculture and private sector indices, the World Bank in direct alliance with the federal government of Nigeria, would have you believe you are doing well.

I will be bursting all sorts of bubbles with this article, so feel free to send me your displeasures after reading it. To better grasp what this article is speaking about, it’ll help that you understand the concept of what the gross domestic product (GDP) is, a measure by which the growth and worth of nations is measured by.  The gross domestic product (GDP) is one of the primary indicators used to gauge the health of a country’s economy. It represents the total dollar value of all goods and services produced over a specific time period – you can think of it as the size of the economy. Usually, GDP is expressed as a comparison to the previous quarter or year. For example, if the year-to-year GDP is up 3%, this is thought to mean that the economy has grown by 3% over the last year.

Measuring GDP has been made to look complicated (which is why it is left to the economists), but at its most basic, the calculation can be done in one of two ways: either by adding up what everyone earned in a year (income approach), or by adding up what everyone spent (expenditure method). Logically, both measures should arrive at roughly the same total. It can be seen in some ways like your turn-over.

So, let us start with the obvious. The listing done by the World Bank ranks countries based on the percentage growth ratio, in comparison to other countries. What this effectively means is that, we are judged by how well we did in relation to our size and not necessarily on a universal basis. For instance, Nigeria grew at a GDP ratio of 6.5% in 2012, a figure many hailed as being an indication of work done; and in 2012, America also grew, but by a mere 2.5% GDP. Now, to the financially untrained eye, this may give the impression that Nigeria actually performed better than the US in 2012; until you ask the question, what was Nigeria’s GDP prior to this 6.5% growth.

Nigeria’s GDP stood at a commendable $243+billion as at 2011, and if we grew by 6.5% it would bring our GDP to about $259+billion as of today. Which obviously isn’t bad, but then compared with the US, with a GDP of $14+trillion and grew at 2.5% GDP (about $350 billion, bigger than Nigeria’s entire GDP); the total would come to about $14.7trillion; and no, I am not comparing Nigeria with the US (as if that were possible), I am only trying to show the folly behind the whole percentage growth idea.

As one can imagine, economic production and growth, what GDP represents, has a large impact on nearly everyone within that economy. For example, when the economy is healthy, you will typically see low unemployment and wage increases as businesses demand labor to meet the growing economy. A significant change in GDP, whether up or down, usually has a significant effect on the stock market. It’s not hard to understand why: a bad economy usually means lower profits for companies, which in turn means lower stock prices. Investors really worry about negative GDP growth, which is one of the factors economists use to determine whether an economy is in a recession.

But, even on the basis of this, Nigeria no longer stands on the that top ten list of “fastest growing countries”. Our 6.5% GDP fell way short of our African brothers like Libya (12.2%), Mozambique (8.2%), Rwanda (7.8%) and Ghana (7.6%), who all managed to make the top ten listings in 2012. For me this places a giant ‘F’ on our report sheet as a nation with massive growth and economic potential. I believe that by our sheer population size and natural resources, Nigeria should grow in double digit GDPs for at least for the next 15years; if we can start to harness the power of production, export and internal consumption.

According to IMF, global growth in 2013 will be an uphill climb but projects growth to reach 3.5% with emerging markets providing much of that boost.  As expected, we are already seeing signs of this through the scope of corporate earnings. In January, corporate earnings drove stock markets up, thanks in large part to emerging markets. Investors from all over the world are pouring in to the Nigerian Bond and equity markets, as it is clear that the entire Nigerian economy is under-valued. This for me is the unseen benefit in the dark cloud, our vast potential for growth that has come to the notice of global investors.

While it’s not new that emerging markets are giving much-needed horsepower against the headwinds of the US and the Eurozone, it is interesting to note that countries like China, Indonesia and India still hold a wealth of untapped potential for investors. Younghao Pu, UBS chief investment officer for Asia Pacific, points out that emerging markets account for 50% of global GDP, but only 20% of stock market capitalization. That means there’s a lot of potential to grow. He believes Tier 1 Chinese cities like Beijing and Shanghai are saturated, mature markets where growth is decelerating. This is Africa’s cue to step on the big stage, fix its infrastructural problems and become the choice destination for investors. We can’t continue to brandish our GDP growth as a measure for success, we must begin to publicise the growth potential of our markets.

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Op-ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija.

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