Gross Domestic Product (GDP) is a powerful
political tool — but it hides more than it
reveals. Mail & Guardian examines
Nigeria’s quest to take over the position of
Africa’s biggest economy from South Africa
using the GDP baseline adjustment.
Since 2012, the government of Nigeria has
been working to revise the calculation of
economic performance with a view to
producing new measures for its gross domestic
product (GDP). The central goal of this reform
is to update the so-called base year, which is
the benchmark for all calculations used in
computing the GDP of a nation.
The base year is of critical importance as it
determines the year in which prices are held
constant, (which enables statisticians to
distinguish economic growth from inflation),
the weighing of each economic sector with
respect to the whole economy and, crucially,
the type of data that is included in the final
calculation.
Although most higher income countries revise
their base year every five years in order to
account for changes in the nature and shape of
their economies, the majority of low- to
middle-income countries do so more
sporadically, as they lack the technical
resources to overhaul the national income
accounts at regular intervals.
Thus far, Nigeria has been no exception and its
latest revision dates back to 1990, which
means that some booming sectors such as
information communications technology and
entertainment (especially the Nollywood film
industry) are systematically undercounted in
official statistics. But what may appear to be a
mere statistical endeavour may easily trigger a
political earthquake in Africa, with
repercussions on traditional power balances
throughout the continent.
Most estimates suggest that, as a result of the
revisions, Nigeria’s GDP may increase by up to
40% in nominal terms, which means that the
West African powerhouse would overtake
South Africa as the continent’s largest
economy in 2014. Similar leaps have happened
in the past. In 2010, GDP revisions elevated
Ghana to the status of a middle-income
country thanks to a sudden 60% jump in
nominal growth. In Turkey, the rebasing of
GDP produced a 30% increase in 2008.
As I show in my latest book, Gross Domestic
Problem: The Politics behind the World’s Most
Powerful Number, GDP is a powerful political
tool. The most important global governance
institutions, from the G8 to the G20, are
based on GDP credentials. Thus far, South
Africa has been the only African country
represented in the G20 on the grounds of the
scale of its economy.
The Nigerian question
What will happen if Nigeria claims this status?
Would it affect South Africa’s membership of
the Brics, and would Nigeria become the
preferred counterpart of Brazil, Russia, India
and China? There are many who believe
Nigeria’s overtaking of South Africa would
produce significant effects in the governance
structures of the continent.
In the past few years, Nigerian politicians have
become increasingly assertive with respect to
their role in the continent and they wait for
the GDP revisions to do the trick. Several
pundits already see the West African giant as
the new continental leader.
Arguably, this GDP battle may ruffle some
feathers in Pretoria, where policymakers fear
their country may lose its traditional crown as
leader of the African continent in world
politics.
But the GDP battle hides more than it reveals.
This is because GDP is a very misleading
measure of economic performance, let alone
social and political progress. Neither Nigeria
nor South Africa is a healthy economy.
For many reasons, however, the former is far
worse than the latter, and the whole continent
would be much worse off if Lagos were to
replace Johannesburg as Africa’s economic
hub.
Both South Africa and Nigeria are among the
least sustainable economies in the world.
According to the World Bank, the depletion of
nonrenewable energy in Nigeria accounted for
about 25% of its GDP in 2013.
Decline in natural resources
South Africa is Africa’s most polluting country
and the 13th worst emitter of carbon dioxide
in the world.
According to the United Nations Development
Programme, both South Africa and Nigeria
have experienced a significant decline in
natural resources since 1990. Although these
countries enjoy relatively large pools of fossil
fuels, their reliance on energy-intensive
economic growth has imposed huge
drawdowns on their natural capital base, with
serious risks for human health, the
environment and the subsistence of local
communities.
In most areas, Nigeria has been faring much
worse than South Africa. The Inclusive Wealth
Index (IWI) published by the UN measures the
growth of produced capital (for example, GDP)
against the stocks of natural resources that are
depleted in the process. For the IWI, Nigeria is
by far the worst performing country.
When the gains in terms of GDP are offset
against the depletion of human capital and
natural resources, the Nigerian miracle
evaporates altogether. Rather than increasing
its overall wealth, the West African country
has been accumulating economic losses at an
average annual rate of 1.8% since 1990.
Nigeria has also overtaken South Africa in the
costs associated with environmental
degradation: 2.51%, compared with the 2.24%
of the Rainbow Nation.
During the period 1990 to 2008, Nigeria
destroyed 41% of its forest resources, one of
the highest deforestation rates in the world.
According to the Resource Governance Index,
Nigeria falls at the bottom of the global
ranking, with a very poor record in terms of
transparency and accountability in the
management of its oil riches, more than 20
places below South Africa.
We all know about the dire effects of
multinational companies’ systematic
exploitation of oil fields in the Niger delta:
environmental destruction, political
destabilisation and human displacement.
Role model for the continent
But GDP regards these phenomena as “positive”
for the economy, with paradoxical
consequences for the way in which most
African economies are designed and run. No
surprise, therefore, that one of the world’s
least sustainable societies is now touted as a
role model for the continent.
As the UN recognises, GDP focuses exclusively
on the “cash” being generated by market
activities (that is, present income and
production flow) whereas alternative measures
of inclusive wealth highlight the importance of
stocks of assets and their changes over time.
The politics of GDP makes countries blind by
rewarding short-term consumption and
wholesale exploitation of natural assets at the
expense of social justice and sustainability.
There is no economic success without
sustainable progress, and African economies
would be better off if their leaders realised
that GDP-based frameworks are very
misleading. If South Africa is serious about
leading the continent towards a brighter
future, it should develop a more
comprehensive wealth-based accounting
system and help the rest of Africa, including
Nigeria, to do the same.
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