Nollywood, the informal name for Nigeria’s film industry, produces more films a year than Hollywood and only just less than Bollywood. It employs 1 million people, making it the largest employer in Nigeria after agriculture.
It produces more than 50 movies a week and rakes in about $590 million (R6.2 billion) a year. Yet until Sunday, it had never been included in Nigeria’s official gross domestic product (GDP) figures. Now, on paper, it contributes 1.4 percent of GDP.
This is just one of the many changes that have taken place after Nigeria decided to rebase its GDP measurements for the first time in 24 years; most countries do it every three to five years.
Rebasing GDP measurements is important because calculations need to keep up with the changing economy. Rebasing means changing the way statistics are measured and compared, not just in the years following the rebasing but for the years preceding it as well. It creates an entirely new time series of data that allows comparison across time periods based on a new set of measurement criteria.
The last time South Africa rebased its GDP measurements was in 2009, choosing 2005 as its base year. All official real GDP calculations published today are measured by the methods and prices used in 2005, taking out the effect of inflation since then. South Africa is long overdue for a rebasing, and when it is done the official GDP figure is likely to change – although probably not as much as Nigeria’s.
Nigeria’s published GDP nearly doubled to reach its new official level of $509.9bn – 60 percent larger than South Africa’s. For the first time, South Africa is no longer the largest economy in Africa.
Nigeria now records 46 industries (up from 33), including new additions in information technology, music, online sales, airlines and film production. According to old figures, telecoms used to contribute 0.8 percent of GDP, and oil and gas contributed 32 percent. They now contribute 8.6 percent and 14 percent, respectively.
Its debt-to-GDP ratio has dropped from 19 percent to 11 percent.
It’s all lights, fireworks, and much ado about nothing. Rebasing simply puts reality on paper, it does not change the reality; 61 percent of Nigerians live on less than a dollar a day and that was the same last Saturday as it will be next.
At most, the good news is that Nigeria is taking its economy seriously but investors would be ill-advised to think the Nigerian market is larger than previously thought or that growth prospects are any higher. Growth is caused by an increase in demand for goods and services; Nigeria’s population still demands exactly what it used to.
Rating agencies agree, and neither Standard & Poor’s nor Fitch changed its outlook on Nigeria after Sunday’s news.
Nigeria’s new GDP figure offers little threat to South Africa, and certainly no more than many other African economies already do. But it should be a wake-up call that change is happening in Africa and South Africa is no longer leading it. South Africa’s economy is growing slower than that of Algeria, Senegal, Botswana, Angola, Tanzania, Mozambique, Ethiopia, Ghana, Niger, Nigeria and Libya, among others. While these economies may not boast the institutions and infrastructure South Africa does, they are not relying on South African business for their growth.
South Africa needs to make sure growth in Africa provides an opportunity for lucrative business, not fierce competition.
Pierre Heistein is the convener of UCT’s Applied Economics for Smart Decision Making course. Follow him on Twitter @PierreHeistein.