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US Development Policy


While I was plowing through Morten Jerven’s enlightening book Poor Numbers last year, my mind concentrated on Nigeria.  It stayed with Nigeria.  At that time, I was consumed with figuring out what on earth was going on with Nigeria’s poverty figures.  How was it possible for the country to experience growth in both its GDP and extreme poverty rates at the same time?  It didn’t seem to add up.  I could imagine a scenario whereby Nigeria’s elite was capturing the majority of the economic gains.  But, how could that lead to more Nigerians living in extreme poverty – both in relative and absolute terms? 

After reading Jerven’s book, I stopped my quest for answers.  It appeared that all, or a good deal, of the publicly reported statistics were rubbish.  His argument was as shocking as it was convincing – bad Nigerian GDP and population data was being used to produce even worse estimates for things like poverty rates.  Worse, this game had been going on for a very long time.  Until the Nigerian National Bureau of Statistics produced more current and accurate statistics, it was a fool’s errand to look for answers that simply couldn’t be found. 

This past Sunday (April 6), the Nigerian authorities finally provided new, rebased GDP statistics after three years of suspense.  It turns out that Nigeria’s economy was actually nearly 90 percent larger than previously thought.  As expected, this has set off a flurry of media attention.  Disappointingly, most of it has focused on Nigeria surpassing South Africa as the region’s largest economy.  That’s simply the surface story.  There are many, much more fundamental stories that aren’t being reported.  Here are three that deserve more attention, both now and in the future.

1)      We need to revisit what we think we really know. 

Thousands of econometric studies about Sub-Saharan Africa have included GDP or income per capita data as a factor, whether they’re on the left- or right-hand side of the equation.  Following Nigeria’s 89 percent GDP rebasing, Ghana’s 60 percent adjustment in 2010, Zambia’s 25 percent adjustment earlier this year, plus more coming soon, we need to reconsider how well these past studies have actually captured the reality on the ground.  This should send shock waves and cold shivers through the research community.  It raises fundamental questions about the explanatory power of studies related to almost every development, financial, or economic issue.  My prediction is that we’ll soon see a wave of entrepreneurial young economists replicating seminal papers with more updated data.  And that’s probably a good thing.

2)      Nigeria’s social spending levels are even worse than we thought.

Before the GDP re-basing, Nigeria had some of the lowest social spending levels in the world.  Well, those government spending levels, when measured against GDP, just got a whole lot worse.  For example, public health spending equaled only 1 percent of GDP in 2011 (not the 2 percent we thought).  And we still have no clue about public education spending because the Nigerian government doesn’t publish those figures.  This is the sub-story of Nigeria’s alarmingly low tax mobilization base, which at 10 percent of GDP, is one of the lowest in the world. 

3)      As a middle-income country, Nigeria will quickly graduate from access to concessional financing.

Nigeria’s access to cheap financing from the African Development Bank, World Bank, and many other development agencies will come to a rapid end.  Its per capita income now vastly exceeds the MDBs’ concessional cutoff ($2,700 versus $1,200) and has ready access to international credit markets.  My colleague, Todd Moss, wrote about a similar implication for Ghana after its GDP adjustment in 2010.  Since Nigeria has very low public debt levels (11 percent of GDP in 2012), it has plenty of borrowing headroom.  However, the terms of that borrowing are about to get a lot harder, which will need to be watched more closely than in the past.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.