By Kede Aihie
Nigeria’s GDP is likely underestimated due to the significant contribution of the informal sector, which accounts for around 70% of the economy. This sector includes activities like small-scale farming, street trading, and artisanal services, but its contribution is often underreported due to a lack of formal records and taxation.
In 2012, Nigeria Magazine published a groundbreaking report titled “Nigeria Overtakes South Africa as Largest Economy in Africa”. This article was based on information provided to the magazine’s founder, Kede Aihie, by a business adviser from UKTI.
The report, which appeared on page 23, estimated Nigeria’s GDP at $555 billion, a figure that the authors acknowledged might even be understated. Interestingly, this article caught the attention of a trade minister at the Nigeria High Commission in London.
Two years later, in 2014, Nigeria rebased its economy, and the results remarkably reflected Nigeria Magazine’s predictions made two years earlier. This validation underscored the magazine’s insightful reporting and its ability to identify emerging trends in Nigeria’s economy.
The informal sector is predominantly driven by young entrepreneurs, with 58% of informal business owners under 34 years old. This highlights the importance of supporting and formalizing these businesses to unlock their full potential and contribute to the country’s economic growth.
Other sectors like the creative industry, digital economy, sports, and diaspora remittances also make significant contributions to the economy, but are often not accurately captured in official GDP figures. A more comprehensive and accurate accounting of these sectors could potentially reveal a much larger GDP figure, possibly exceeding $1 trillion.
This underestimation has significant implications for economic planning and policy-making. If Nigeria’s GDP is indeed higher than presently reported, it would reflect the true size and potential of the economy. This, in turn, would provide a more accurate basis for decision-making and resource allocation.
The service sector is the largest contribution to the GDP, a massive increase from the 1990s
To increase its GDP export component, Nigeria should diversify its economy, invest in infrastructure, and promote export-oriented industries. Developing Special Economic Zones, enhancing trade facilitation, and supporting small and medium-sized enterprises can also drive export growth. Additionally, investing in education and training programs, encouraging foreign investment, and fostering regional trade can help Nigeria achieve sustainable economic growth.
Nigeria’s thriving fintech sector, which accounts for approximately one-third of Africa’s fintech market, is driving economic growth and financial inclusion. With a projected 10% annual growth rate, the sector is expected to contribute significantly to Nigeria’s GDP. However, this growth was not fully captured when Nigeria last rebased its economy in 2014. As fintech continues to extend financial services to underserved communities through mobile banking, digital payments, and other innovations, it is likely to unlock new economic opportunities and increase Nigeria’s GDP.
In entertainment, the Afrobeats genre has emerged as a significant contributor to Nigeria’s economy, with its global popularity generating substantial revenue. However, this contribution was not fully accounted for in Nigeria’s GDP calculations prior to 2014. The rise of digital streaming platforms has enabled Afrobeats artistes to reach a global audience, collaborate with international stars, headlining sold-out concerts, and influence music globally. As a result, Afrobeats has become a major export, earning significant foreign exchange for Nigeria. With its growing global demand, Afrobeats is likely to continue contributing substantially to Nigeria’s GDP, potentially pushing it closer to the one trillion dollar mark.
Tourism which has previously not been measured or added to GDP calculations has taken a new dimension with Nigeria’s “Detty December” festivities that have become a significant contributor to the country’s GDP, attracting thousands of visitors to Lagos, Edo, Ogun and Ondo. Which is generating substantial revenue. Afrobeats and social media have played a crucial role in promoting .
Nigeria’s mining sector contributions are vastly underreported due to illegal mining activities. The informal sector, dominating the industry, operates outside the formal economy, hiding revenues and exports. This underreporting conceals the sector’s true GDP potential.
