Ngozi Okonjo-Iweala
Ngozi Okonjo-Iweala, minister for economy and finance

Nigeria overtook South Africa on Sunday to become Africa’s largest economy and 26th largest in the world after the government released updated figures that nearly doubled estimates for gross domestic product.

As a result of the statistical revision, Nigerian GDP for 2013 was $509bn, 89 per cent larger than previously stated for last year. The change was made by bringing forward the base year for calculations to 2010 from 1990, when the structure of the economy was very different and services such as banking and telecoms had barely taken off.

Companies ranging from Nestlé and Standard Bank to Heineken and MTB have already poured millions of dollars into Nigeria but foreign businessmen and analysts said the revision could serve as a catalyst for further investment.

“The revision will have a psychological impact. It underlines to foreign investors that this country has a large consumer base. It validates the investment thesis,” Ngozi Okonjo-Iweala, the minister for economy and finance told the FT ahead of a press conference in the capital Abuja. “The idea [of the rebasing] is not to be the biggest; the main objective is to measure the economy properly.”

South Africa’s GDP stood at $372bn last year, although its population of 51m is a fraction of Nigeria’s 169m.

The GDP increase far exceeded the expectations of analysts who had forecast an increase of between 40 and 60 per cent following the rebasing exercise. Most countries do one on a regular basis but Nigeria has not done so since 1990.

It places Africa’s most populous nation and leading oil producer within reach of its ambition to become one of the world’s top 20 economies above other developing countries such as Thailand, Venezuela and Colombia. It potentially provides a huge boost to the case for investment.

The figures follow an exhaustive data review intended to give a more accurate picture of the economic activity that has driven growth over the past two and a half decades. In a similar exercise, Ghana’s GDP rose more than 60 per cent in 2010.

The figures have been verified by the International Monetary Fund, the World Bank and the African Development Bank over the past three months.

“The actual size of the adjustment is probably of less significance than the psychological effect this will have on perceptions about Africa,” said Roelof Horne, portfolio manager at Investec Asset Management. “South Africa was historically the ‘go-to’ country for investment into Africa. However, the reality is that other regions are increasingly asserting their economic voice.”

The data also significantly alter the share of Nigeria’s economy held by different sectors, providing a more accurate reflection of the growth in services and consumer demand that has accompanied rapid urbanisation.

The share held by oil and gas is down from 32.4 per cent to 14.4 per cent showing that the economy has diversified to a much greater extent than previously recorded although the state is still dependent on oil earnings for more than 70 per cent of revenues.

Agriculture’s share of GDP moves down from 34.6 per cent to 21.6 per cent, as does industry which goes from 36.2 per cent to 25.6 per cent.

Within industry, however, telecoms moves up from just 0.8 per cent of GDP to 8.6 per cent and the national film industry, known as Nollywood and which had hitherto not been reflected in the statistics, takes up 1.4 per cent.

“Our statistical data has grossly underestimated the size of the opportunity,” said Aigboje Aig-Imoukhuede, former chief executive of Access bank, one of Nigeria’s leading lenders. He added that the sectoral changes also highlight where the opportunities for job creation lie, showing that the entertainment industry and information technology have provided dramatic growth.

The calculation alters several other figures. It dramatically lowers Nigeria’s already healthy debt-to-GDP ratio of around 20 per cent, and strengthens the case for further borrowing.

On the other hand, the figures will not put more money in the pockets of the common man. More than 60 per cent of Nigeria’s population is thought to live in severe poverty while, at the top end, a new generation of multimillionaires and billionaires has emerged.

“We need to grow faster, like China did, faster than 7 per cent. And it is not just faster, we need better quality of growth,” Mrs Okonjo-Iweala said.

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