Nigeria to Include Informal and ‘Illegal’ Activities in GDP Calculation

Nigeria to Include Informal and ‘Illegal’ Activities in GDP Calculation

The National Bureau of Statistics (NBS) in Nigeria has announced plans to incorporate informal and illegal economic activities into its Gross Domestic Product (GDP) calculations. This move aims to provide a more accurate picture of the country’s economic size and structure.

GDP measures the size of an economy by calculating the value of goods and services produced. By including informal and illegal activities, the NBS seeks to account for economic contributions often overlooked.

“There are economic activities that have no legal backing,” explained Moses Waniko, a senior NBS official, during the announcement on Thursday. He highlighted activities such as prostitution, which, though illicit, generate income that impacts the formal economy.

The recalibration will use 2019 as the base year, incorporating sectors like:

• The digital economy,
• Health and social insurance,
• Pensions,
• Modular refineries,
• Mining, and
• Households employing labour.

This exercise follows the last Gross Domestic Product revision in 2014 and aims to reflect the dynamic nature of Nigeria’s economy.

1. Economic Ranking: Nigeria, currently ranked the fourth-largest economy in Africa by the International Monetary Fund (IMF), could see its position change. The country was the continent’s largest economy until 2022 but was overtaken by South Africa, Egypt, and Algeria.
2. Debt Metrics: Waniko noted that the rebasing could impact financial ratios, such as the debt-to-GDP ratio, which stood at 18.5% as of September 2019. A larger GDP base could lower this ratio, making debt levels appear more sustainable.
3. Per-Capita Income: With a bigger GDP, Nigeria’s per-capita income is also expected to rise, providing a more optimistic view of individual wealth levels.
4. Sectoral Shifts: The contribution of the crude oil sector to GDP has declined, now ranking fifth, with agriculture and trade leading. Real estate has climbed to third place, reflecting structural changes in the economy.

While this approach will provide a clearer understanding of Nigeria’s economic potential, some experts warn of the challenges in quantifying activities from the informal and illegal sectors. The credibility and methodology of these calculations will be critical to ensuring the revised GDP accurately represents the economy.

This update aligns with global best practices as many countries adopt broader GDP measures to capture hidden economic contributions. It also underscores Nigeria’s efforts to adapt to evolving economic realities and present a holistic picture of its growth trajectory.