By Uri Friedman, The Atlantic – April 7, 2014 | Thanks to Golden Age of Gaia.
Something strange happened in Nigeria on Sunday: The economy nearly doubled, racking up hundreds of billions of dollars, ballooning to the size of the Polish and Belgian economies, and breezing by the South African economy to become Africa’s largest. As days go, it was a good one.
It was, in fact, a miracle borne of statistics: It had been 24 years since Nigerian authorities last updated their approach to calculating gross domestic product (GDP), a process known as “rebasing” that wealthy countries typically carry out every five years.
When the Nigerian government finally did it this week, the country’s GDP—the market value of all finished goods and services produced in a country—soared to $510 billion.
To celebrate the occasion, Nigeria’s National Bureau of Statistics released a pretty entertaining PowerPoint presentation—an admixture of sober economic pronouncements and clip art. It includes this depiction of the long road to $510 billion:
Nigeria’s overnight transformation raises two distinct but interconnected questions. First: What do we miss about countries when we don’t have accurate economic data about them—and what are the practical implications of that blindness?
In computing its GDP all these years, Nigeria, incredibly, wasn’t factoring in booming sectors like film and telecommunications. The Nigerian movie industry, Nollywood, generates nearly $600 million a year and employs more than a million people, making it the country’s second-largest employer after agriculture. As for the telecom industry, consider that there are now some 120 million mobile-phone subscribers in Nigeria, out of a population of 170 million. Nigeria and South Africa are the largest mobile markets in sub-Saharan Africa, and cell-phone use has been exploding in the country:
Incorporating the film and telecom industries into Nigeria’s GDP made a huge difference in the services sector, rendering the country’s economy not just bigger but more diversified:
Cases like Nigeria’s indicate that “Africa as a whole probably is not as poor as we’ve long thought,” the economist Diane Coyle writes in her great (and well-timed) new book, GDP: A Brief but Affectionate History. “In many African, Asian, and Latin American economies, the GDP calculations take no account of phenomena such as globalization, or the mobile phone revolution in the developing world…. There are fundamental weaknesses with the collection of basic statistics such as what businesses there are, what they are selling, or what goods and services households spend their incomes on. The surveys needed to collect this information are carried out only infrequently…. [O]ne estimate suggests that for twenty years sub-Saharan African economies have been growing three times faster than suggested by the ‘official’ data.”
“One estimate suggests that for twenty years sub-Saharan African economies have been growing three times faster than suggested by the ‘official’ data.”
And these economic indicators are not mere abstractions—they have real-world consequences. Coyle notes that when Ghana rebased in 2010, its GDP increased by 60 percent, transforming it instantly from a “low-income” country into a “low-middle-income” country. Aid organizations use these categories to determine levels of financial assistance. John Campbell at the Council on Foreign Relations points out that newly rebased Nigeria may now clamor for membership in political groupings like the G-20, the BRICS, and even the UN Security Council.
But all this brings us to the second question: Are we too obsessed with GDP as a measure of countries’ economic strength and health? As Coyle wrote on Monday, this week’s GDP overhaul will likely make investors and entrepreneurs more confident in Nigeria. And yet, “Nothing real has changed, the economic problems like poverty and inequality and a poorly-functioning state remain.”
Campbell delves deeper into the economic problems facing individual Nigerians—issues that no amount of rebasing can solve:
South Africa’s GDP numbers are three times larger than Nigeria’s on a per capita basis. South Africa has a diverse, modern economy, while Nigeria remains heavily dependent on oil…. Further, World Bank president Jim Yong Kim included Nigeria with India, China, Bangladesh, and the Democratic Republic of the Congo as the countries with the largest number of people living in “extreme poverty,” defined as less than $1.25 per day. He went on to say that if you add to those five countries Indonesia, Pakistan, Tanzania, Ethiopia, and Kenya, those ten countries together account for 80 percent of the world’s total “extreme poor.”
GDP, Coyle writers in her book, is a “made-up entity”—a product of the 1940s “designed for the twentieth-century economy of physical mass production, not for the modern economy of rapid innovation and intangible, increasingly digital, services.”
The good news is that the Nigerian government now has a better system for measuring its economy. The bad news? Knowing Nigeria has a $510-billion economy doesn’t reveal a whole lot about the welfare of its citizens.