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 and
Foreign 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”.
Multilateral organisations such as the United Nations Industrial
Development Organisation (UNIDO), the United Nations Economic Commission
for Africa (UNECA) and the African Union are advocating for inclusive
and sustainable industrial development as the key to structural economic
transformation of African economies. This is hinged on the
export-oriented-industrialisation (EOI) route taken by South Korea,
Singapore and other East Asian Tigers to economic development and
prosperity.
Industrialisation is regarded as the surest route to poverty
reduction and economic transformation. With the labour intensive nature
of manufacturing industry, the share of people engaged in subsistence
agriculture falls as those engaged in agro-processing, light and heavy
manufacturing and ancillary services rises. Economists argue that
industrial development creates employment along a value chain, raises
incomes, and improves human development. As
Dani Rodrik
emphasises, the manufacturing sector is where the world’s middle
classes take shape and grow; without a vibrant manufacturing base,
societies tend to be more unequal.
In Nigeria, as the new GDP series reveals, this industrialisation
process is yet to take root. The manufacturing sector, which was 10% of
GDP in 1980, constitutes only 6.9% in the revised figures. By contrast,
the over 200-fold growth in ICT, trade and financial services means that
the service sector now constitutes 52.3% of economic output. Unlike the
manufacturing sector, which employs low-skilled, low-wage labour, these
services are highly capital and technology intensive.
Entry-level staff in banks in the country require a minimum of a
tertiary qualification. While the mobile tech start-up revolution
sweeping across the commercial capital Lagos, is dominated by tech-savvy
entrepreneurs with a highly specialised skill set. Therefore, the
mobile revolution hasn’t led to an explosion of job opportunities, as
youth unemployment persists at 54%. A stark reminder of the unemployment
situation is the recent
recruitment exercise
of the immigration service, in which 6.5 million Nigerians applied for
4,000 jobs and where 19 people were crushed to death at stampedes at the
recruitment centres.
At the other end of the scale, the telecoms sector is creating a
booming informal economy of call credit vendors, informal call centres
and other microenterprises with limited scope for upward mobility.
Though the GDP series involve macro-level aggregate data, some
inferences about regional distribution of economic activity can be made.
While agricultural output has increased, it has grown much more slowly
than the capital, technology and skills intensive services sector.
Agriculture’s decline as a share of GDP has more implications in the
northern states, where it dominates.
Critically, the diminishing share of agriculture as a percentage of
GDP, which should indicate economic development in an industrialising
economy, is not the case here. Hundreds of textile, food and beverage
and other light manufacturing industries lie moribund in industrial hubs
in Kaduna and Kano states. Electricity shortages, infrastructural decay
and influx of cheap Chinese imports and smuggled consumer goods are
some of the factors attributed to the acceleration of
de-industrialisation in the North. Tellingly, farmers are not leaving
their farmlands in villages to become factory workers in modern
industries, but are urbanising in the fringes and becoming an underclass
in the vast unofficial activities in the informal sector.
Although some states like Kano have a vibrant trade-based economy (and the ‘
Kannywood’
local entertainment sector is booming), economic output in the northern
states is mostly agrarian. On the other hand, the services sector –
banks, telecoms, hospitality, trade – are mostly concentrated in the
South. Of the
21 commercial banks in the country, only one is owned by and headquartered in the North.
Even in the South, Lagos and to a lesser extent, the four major
oil-producing states, account for the bulk of economic output. Lagos,
where most banks, financial institutions, telecoms firms, oil companies
and other private sector organisations are headquartered could be
Africa’s fifth largest economy, if it were a separate country. As an
outlier, it is the only self-sufficient state out of 35 others, able to
generate over 50% of its revenues from internal sources more than its
monthly allocations from the centre.
Conclusions about the regional dimension of economic growth can only
be made with certainty when the state-level GDP figures are released by
the Nigerian Bureau of Statistics (NBS). Yet we can deduce from the new
series as to why Nigeria’s economic boom is not only non-inclusive, but
geographically concentrated, in which many northern states lag behind.
As expected, these figures are being politicised by both the
government – which has adopted a triumphalist attitude and implicitly
claims credit – and sceptical Nigerians, who are worried about the
‘jobless growth’ and poor human development situation. Both sides miss
the point about the purpose of the rebasing exercise, which is mainly to
provide a more accurate picture of the economy. Thankfully, the NBS has
dispassionately emphasised that “the rebasing exercise does not in
itself reflect the effectiveness or otherwise of public policy”.
The onus now lies on policy makers to address these structural
economic problems head on, not merely to politicise them. The government
has recently launched an industrial policy, an Agricultural
Transformation Agenda, and has privatised the power sector. With
Nigeria’s staggering size, its booming population and its equally
staggering problems, there is certainly scope for doing much more.
Zainab Usman is a DPhil Candidate at the University of Oxford.
AfricanArguments
