This is an article I recently wrote for African Arguments on Nigeria’s recently revised GDP series.
According to recently reviewed GDP figures, Nigeria is now Africa’s biggest economy. It was about time a more accurate measure of economic output, which captures Nigerians’ entrepreneurial zeal, was adopted. The headline-capturing highlights of the new series reveal the scale of the economy, and greater economic diversification with the rapid growth of non-oil sectors. Significantly, the figures indicate how this growth accounts for the “jobless” economic expansion, the slow pace of industrial development and the regional dimensions of the economic boom.
According to the rebased figures, six sectors now account for 70% of nominal GDP rather than three in the old series. The service sector grew fastest, by 240%, and is progressively constituting a larger portion of the GDP. Conversely, the share of the two hitherto giants – agriculture and oil has fallen to 21% and 14.4% respectively. Nigeria is transiting to a services-driven economy due to the rapid growth of information and communications technology (ICT), banking, trade and the informal economy.
Zenith Bank, UBA and Guaranty Trust Bank are Nigerian financial institutions with a huge presence across the continent. Mobile phone subscription has exploded from just 2.2 million lines in 2002 to over 169 million by 2013. Call credit vendors, petty traders and other unofficial activities in the informal economy have also been included in the new series, as a component of the services sector.
On the surface, the emergence of the service sector as a major growth driver indicates a greater diversification of the country’s production structure away from oil (a long sought after goal). The share of the oil and gas sector has fallen from 32.4% of GDP in the old series to just 14.4% in the new series. On one hand this is good news, on the other hand, it reveals deeper structural distortions. Nigeria appears to be leap-frogging from an extractive to a services-oriented economy without commensurate industrial development, and this comes with some baggage. This slow pace of industrialisation accounts for the non-inclusive nature of growth and widening inequality in the country.
The necessity to experience industrialisation as a phase in the economic development process from a poor to a rich society is well documented. The Economist andForeign Policy magazines both recently hosted debates on the necessity of industrialisation for sub-Saharan African economies. Economist Ha-Joon Chang points out categorically that “…it is a fantasy to think that developing countries can skip industrialisation and build prosperity on the basis of service industries”.
Read the rest of the article on the African Arguments website HERE.