Nigerian Stock Exchange chief executive Oscar Onyema says the size of an economy matters because some investments are not viable in a smaller market. - Photo: Reuters

Lagos - What matters more: the size of the pie or how many mouths it has to feed? That depends whether you’re eating pies, or selling them.

Most of Nigeria’s 170 million people live below the poverty line, so many complained they didn’t feel any richer when the oil producing country’s statistics bureau announced on Sunday the economy had replaced South Africa as the continent’s biggest.

Nigeria’s gross domestic product (GDP) for last year was rebased up to an estimated nearly $510 billion (R5.3 trillion) – a “pie” one and half times the size of South Africa’s, but feeding more than three times as many people.

Nigerian leaders hope the statistical revamp will help them “sell” Africa’s most populous market to investors, including mall builders, manufacturers and retailers offering everything from processed foods and household appliances to luxury cars.

But development economists argue that the leaders’ attention should be on improving the health, education and incomes of ordinary Nigerians, many of whom struggle to feed their families.

Last year, the Economist Intelligence Unit rated Nigeria as the worst place for a child to be born out of 80 countries surveyed.

“Really what matters in the end is per capita, how well our individuals are doing,” World Bank chief Africa economist Francisco Ferreira said after the statistical change in Abuja.

In GDP per capita terms, Nigeria is looking healthier than before rebasing: per capita GDP was $2 688 last year, from an estimated $1 437 in 2012. Yet that masks growing inequality: at around 60 percent, absolute poverty in Nigeria is stubbornly high despite five years of 7 percent average annual GDP growth.

But do better living standards for all really matter to investors looking to cash in on a big economy?

On a per capita basis, Botswana, Mauritius and Seychelles are among Africa’s top five richest states. The three have a population of 2 million or less, so they are admired but cannot claim heavyweight status when it comes to competing with other countries on the continent for the attention of foreign investors.

Nigeria’s potential is predicated on its large population.

Economist Jim O’Neill notably included Nigeria in his Mint group of countries, alongside Mexico, Indonesia and Turkey, which he thinks will join the Brics (Brazil, Russia India, China and South Africa) he named as the emerging economies shaping the world’s future.

All have large, swelling populations, with a demographic bulge around the soon-to-be-most-productive younger generations.

“Size matters,” Oscar Onyema, the chief executive of the Nigerian Stock Exchange, said. “Size means you will be able to do… projects you would not have considered in smaller economies.”

For retailers targeting customers at the bottom of the socio-economic pyramid, a national income spread across more households – lower GDP per capita, in other words – might actually be a good thing, many economists argue.

For Kenyan industrialist Manu Chandaria, the chairman of Comcraft Group, which sells ironware, including corrugated roofs and pots and pans, Nigeria has massive potential.

“Nigeria is just colossal,” he told the Reuters Africa Summit in Nairobi this week. “Everybody needs to eat. Everybody needs shelter. Anybody who brings in money needs a pot to cook in, they need a roof – so we are in the right place.”

Higher up that pyramid, living standards matter more.

In this regard South Africa, which still has poverty but also a big middle class and an advanced consumer society, beats Nigeria.

Retailers targeting a broader consumer class say Nigeria still needs better infrastructure and a more diversified economy to achieve its full potential as a mass market. – Reuters