Does Nigeria’s GDP Rebasing Suggest a Power Shift in Africa?


An interesting take on how Nigeria’s GDP drastically changed. 

Geopolitical Monitor by Janetta McKenzie

By solving a fairly simple math problem, Nigeria has overtaken South Africa to become the largest economy on the African continent – by quite a bit.  In early April, the Nigerian government announced plans to recalculate the way that it reports Gross Domestic Product (GDP) – a process known in economic circles as ‘rebasing’.

GDP is typically measured against the performance of an economy in a ‘base’ year. Every time GDP is calculated, sample businesses in certain industries are observed to see how fast they are growing, and the weight of an industry in this calculation depends on its prominence in the economy in the base year. Therefore, most countries ‘rebase’ their GDP calculations every few years because the farther away from the base year you get, the more your economy has changed; certain industries have grown and others have become less important, and so as time goes on GDP data becomes less accurate. Until now, Nigeria has used 1990 as its base year. Things have obviously changed drastically since then, so by rebasing their GDP, the Nigerian government is giving the world a more accurate picture of its economy.

While certain industries have always carried a lot of weight in Nigeria – particularly the oil and gas sector – others have been overlooked in a GDP measurement based on the 1990 Nigerian economy. The telecoms industry has exploded in Nigeria in the last 15 years, currently valued at $19 billion USD, and with the rebasing now constitutes 8.6% of GDP, rather than the 1990 figure of 0.8%. In addition, the Nigerian film industry, known colloquially as ‘Nollywood’, has been acknowledged within the new calculations, whereas until now the growing industry had been largely overlooked.

So what does this mean? For the average Nigerian, almost nothing. The GDP rebasing doesn’t put more money in the bank accounts of individuals or provide new job opportunities.  For MNC’s that want to operate in Nigeria, it provides a better snapshot of Nigerian industry and investment risk. For the average Canadian, it means we now know where Nigeria stands in relation to our economy and to the rest of Africa. For the Nigerian economy, it means that Nigeria now has the largest economy in Africa, and that fact has worth on the international stage. In the coming years, it’s unlikely that any pan-African discussions will take place without Nigeria at the head of the table due to their newly-discovered economic clout. Practically overnight, Nigeria’s GDP grew by 89% and as of May 2014 is worth $510 billion (USD).  However, despite this whopping statistical increase, in concrete terms nothing has really changed in Nigeria’s economy.

Nevertheless, while Nigeria’s economy continues to operate as it did before the GDP rebasing, there is still some value to this reorientation. The rebased GDP provides a more accurate picture of the Nigerian economy, and confirms what many already knew – that Nigeria is the rising power on the African continent. The country has a population of 170 million, providing a huge consumer base and attracting foreign direct investment.

But Nigeria’s economic ascendance is not matched by political stability. South Africa, now in possession of the second-largest economy in Africa and the informal ‘leader’ of the continent in international discussions and forums, has slowly but surely improved its political reputation since the abolition of apartheid – but it still has its share of issues, past and present, that have not gone overlooked. Nigeria, in contrast, has one of the most corrupt governments in Africa, an increasingly brazen rebel group in the Boko Haram, and internal territorial tensions that are exacerbated by inherent inequalities in the federal system.  Despite the new size of Nigeria’s economy, South Africa still has higher average wealth levels and more developed infrastructure.

However, despite the many and varied issues within the Nigerian government and administration, Nigeria has given itself an opportunity with its GDP rebasing. While South Africa undoubtedly ranks higher on many measures of development, their economic growth has not matched Nigeria’s in recent years; the government has become complacent as the internationally accepted leader of Africa; and corruption and class tensions have seeped back into the government and bureaucracy. Nigeria has shown that it has the economic clout to ascend to the top of the African political scene; but political and social reforms have to follow, and quickly, if Nigeria wants to solidify its position as a major power in Africa.

Economically, Nigeria doesn’t have much to worry about; multinational corporations are likely to continue to operate in the country whether the social and political situation improves or not. However, in a diplomatic sense Nigeria will not replace South Africa as the continent’s representative in various global forums, such as the G20. At least, not until it can prove to power-holding western nations that it is more than just an economic powerhouse, but a success story of development as well. 


Mexican Central Bank Sees Incipient Economic Recovery


The Wall Street Journal by Juan Montes

MEXICO CITY—Mexico’s central bank said Friday an incipient economic recovery is under way, citing an improvement in exports and government spending, although many economists remain skeptical whether Latin America’s second-largest economy is clearly picking up after more than a year of anemic economic growth.

Most of the five-member board agreed that the economy started to improve at the end of the first quarter and that the recovery will continue in the coming months, the minutes of its most recent policy meeting showed.

The central bank’s comments come as most economists, and independent bodies such as the Organization for Economic Cooperation and Development, have been lowering their growth forecasts for Mexico for this year. Some economists have been arguing that the Mexican economy has been in a recessive period over the last nine months, something the government denies.

Finance Minister Luis Videgaray has repeatedly said Mexico is growing and generating employment, although at a still unsatisfactory rate. The government, led by President Enrique Peña Nieto, is badly in need of results on the economic front: In its first year in office last year, the economy expanded 1.1%, much lower than the 3.5% growth initially expected. In the first two months of 2014, growth amounted to 1.4%.

The central bank appeared Friday to support the government’s view that the economy is picking up. It said auto industry exports, a main factor of the country’s export engine, rose in February. Most board members argued that private consumption likely improved gradually in the first quarter. Government spending is also seen gaining pace after last year’s delays.

The central bank led by Gov. Agustin Carstens left interest rates unchanged at 3.5% on April 25 in a unanimous decision, the minutes showed. Despite concerns about the economy, policy makers didn’t discuss the possibility of a rate cut. Most members argued that the continued reduction in the U.S. Federal Reserve’s asset buying could put pressure on the peso in the coming months.

Mr. Peña Nieto’s government is confident that the economy will strongly rebound as of the second quarter owing to a recovery in the U.S. that will boost Mexican exports, and to the effects of the unprecedented $360 billion in public spending approved for this year.

But most economists remain skeptical.

The consensus sees economic growth at 3% this year, much lower than the 3.9% estimated by the government.

On Thursday, one of Mexico’s main financial newspapers made waves with a front-page headline that read: “Mexico is in recession.” The paper cited cyclical indicators from the statistics agency showing the economy had been in a recessive period in recent months.

Inside the central bank, one board member remained wary, saying that there were no clear signs of a recovery. He argued that household and business confidence remain low, and that new taxes that came into force at the beginning of the year are still affecting domestic demand.

The weak economy has had a positive side. Prices are easing and 12-month inflation hit a six-month low in April at 3.5%. Most policy makers at the central bank saw inflation expectations well anchored for 2014, and agreed that inflation risks were unchanged


Nigerian Investors Unfazed as Kidnappings Highlight Risk


Bloomberg News by Daniel Magnowski and Chris Kay

May 7, 2014

Investors in Nigeria are so far unfazed by the wave of killings and kidnappings by Islamist militants that have rocked Africa’s largest oil producer and sparked international outrage.

As the U.S. prepares to send security personnel to help Nigerian authorities find and rescue more than 200 schoolgirls kidnapped by Islamist militants in the country’s northeast, delegates arriving at today’s World Economic Forum in the capital, Abuja, are still focused on tapping the continent’s oil reserves in the south and a growing middle class.

“It’s grabbing the attention of everybody globally, but it doesn’t give investors in Africa a surprise,” Teresa Coelho, a money manager at BPI Gestao de Activos SA, an owner of Nigerian stocks, said by phone from Lisbon. “It doesn’t change the investment case.”

Executives from Heineken NV (HEIA) to UBS AG (UBSN) are arriving in Nigeria as Africa’s biggest oil producer faces one of the worst rounds of violence in the capital in recent history. More than 90 people have been killed in separate bomb attacks in the past month just miles from where the conference is taking place. Gunmen on April 14 raided dormitories in an all-girls secondary school in remote Chibok in northeastern Borno state and drove off in trucks with more than 200 students.

Those incidents and others carried out by the Islamist militant group Boko Haram have been mainly confined to the north of the country and as long as that remains the case, money will keep flowing into the country, said Kevin Daly, who helps oversee about $12 billion in emerging-market and Nigerian debt for Aberdeen Asset Management. (ADN)

Most Populous

“If this were to spread to other parts of Abuja and to Lagos, which is obviously getting closer to the oil infrastructure, that’s where you start to have some potential impact on investor sentiment,” Daly said in a phone interview from London.

Companies such as Procter & Gamble Co. (PG) and MTN Group (MTN) Ltd., Africa’s biggest mobile-phone operator, have invested in Nigeria to tap Africa’s most populous nation of about 170 million people and the biggest economy that the government says will expand 6.75 percent this year. Foreign direct investment rose 28 percent to $21.3 billion last year, and stood at $2.5 billion in the first two months of 2014, according to the statistics office.

Investor Concern

“Recent bomb attacks in Abuja will strengthen existing concerns among investors about the state of security in Nigeria ahead of elections, even if they do not undermine the long-term investment case for Nigeria,” Alan Cameron, an economist at FCMB Group Plc in London, said in e-mailed response to questions.

The naira has weakened 0.8 percent against the dollar since the start of the year to trade at 161.55 as of 8.25 a.m. in Lagos today. Yields on Nigerian Eurobonds due July 2023 dropped 36 basis points in 2014 to 5.56 percent. The Nigerian Stock Exchange All-Share Index retreated 6.9 percent this year, the worst in Africa among 93 global indexes tracked by Bloomberg.

President Goodluck Jonathan said yesterday he accepted an offer from the U.S. to send “security personnel and assets” to assist Nigeria with helping locate the abducted girls. His administration has also deployed more than 6,000 security personnel for the WEF conference and closed some government offices and all schools in Abuja for the rest of the week.

Insurgent Capacity

Though Jonathan and his military chiefs have repeatedly claimed successes against the insurgents, Boko Haram has not lost its capacity to mount attacks, especially in the northeast, said Bola Tinubu, a member of Nigeria’s opposition All Progressives Congress and a former governor of Lagos.

“Government policy has failed to contain, much less eliminate, the terrorism scourge,” he said in an e-mailed response to questions. Boko Haram’s threat “has economic, political and social dimensions that government ignores at our collective national peril,” he said.

The five-year insurgency in the north by Boko Haram has claimed more than 4,000 lives and forced almost half a million people to flee their homes, according to the Brussels-based International Crisis Group. Boko Haram’s name means “western education is a sin” and the group has been waging a violent campaign to impose Shariah, or Islamic law, in Nigeria.

‘Underlying Strength’

Presidential spokesman Reuben Abati and Finance Ministry spokesman Paul Nwabuikwu didn’t respond to requests for comment.

Finance Minister Ngozi Okonjo-Iweala said in an interview on May 5 that investors will look beyond the Abuja bombings to the “underlying strength of this economy in the long term.”

“People are looking at Nigeria saying: OK, we know they will get on top of this problem, and we are not going to hang back, we are going to come, and we are going to invest, and we are going to look,” she said.

The statistics agency on April 6 revised its data to increase Nigeria’s gross domestic product by more than three-quarters to 80 trillion naira ($497 billion) for 2013, catapulting it ahead of South Africa as the continent’s biggest.

Nigeria depends on crude exports for about 70 percent of government revenue and 95 percent of export income. Oil companies have stayed in Nigeria through a civil war, military coups and an insurgency in the Niger River delta that cut oil production by 28 percent from 2006-2008.

Oil Theft

Royal Dutch Shell Plc (RDSA), Europe’s largest oil company, is among the longest-standing foreign investors in Nigeria, having first set up a company there in 1936. Unrest in the western Niger Delta, the main oil-producing region, in 2006 forced the company to suspend operations. While the security situation has improved, Shell has sold fields in the area, where large-scale oil theft and sabotage remain a problem.

“The tragic incident in Abuja underlines the tension, but our underlying investment thesis remains broadly the same and is based on the fundamental creditworthiness of the country,” said John Bates, an emerging markets analyst at PineBridge Investments, which has $71.4 billion in assets under management, including in Nigerian shares, and government and corporate bonds.

Its EU dream thwarted, Turkey rejects 90 million-euro Cyprus fine


Is this the last straw for Turkey in the pursuit of European Union membership?

The Christian Science Monitor by Alexander Christie Miller

A record-breaking judgment against Turkey for its 1974 invasion of Cyprus is likely to damage further its frayed relationship with Europe.

European Union support for Turkey’s membership bid has already been diminished by accusations of growing authoritarianism and waning press freedom, as well as recent anti-European rhetoric by Turkish leaders to score points domestically. Turkey’s rejection of the court damages will not help that.

The ruling also risks stalling reunification talks over the island of Cyprus, which remains divided between the Greek south and Turkish north 40 years after the war. The money would go to the families of those who died or went missing in the invasion and to Greek Cypriots who remained in an enclave in the Turkish-controlled north.

“It’s unfortunate that this decision has come to pass at the present time,” says Sinan Ulgen, director of the Center for Economic and Foreign Policy Studies in Istanbul. “Not only because there are negotiations on the island, but also because it tends to strengthen the claims that Europe doesn’t like Turkey.” 

Turkish Foreign Minister Ahmet Davutoglu said the ruling is not binding because Turkey does not recognize Greek Cyprus. 

“In terms of the grounds of this ruling, its method, and the fact that it is considering a country that Turkey does not recognize as a counter-party, we see no necessity to make this payment,” Mr. Davutoglu said.

Turkey’s refusal may be the first such instance since it accepted the ECHR’s jurisdiction when it was formed in 1959. Non-payment is likely to result in sustained diplomatic pressure from the Council of Europe, a 47-nation body that recognizes the court’s jurisdiction. However, short of suspending Turkey’s membership – an unlikely move – there are few formal sanctions that can be applied.

“There are no precedents for this,” says Mr. Ulgen, “particularly because the ECHR is demanding that Turkey pay a government it doesn’t recognize. More than the quantity of the fine itself, it’s the procedural aspects that are an obstacle.”

Turkey invaded the island in response to a Greek-backed military coup. Thirty thousand Turkish forces remain stationed in the Turkish Republic of Northern Cyprus, which only Turkey recognizes as a sovereign state.

The Greek-populated Republic of Cyprus has meanwhile joined the European Union and is considered to have formal sovereignty over the whole island. In February, talks between the two sides over reunification resumed after a two-year hiatus.

Hugh Pope, the Turkey-Cyprus director for International Crisis Group, said the fine underlines the fact that the Cyprus conflict continues to inflict economic damage on Turkey. 

Ankara props up Northern Cyprus to the tune of $600 million a year. The ongoing dispute has effectively barred all sides from exploiting the country’s oil wealth and hindered Turkey’s efforts to act as a conduit for oil and gas reserves offshore of Israel.

“One can argue about the fairness of this fine, but I hope that it will at least remind Turkey that not solving Cyprus is like driving around with the handbrake on,” says Mr. Pope.

These 6 Nigerian Companies Are Set For Massive Global Growth, Say Economists


Promising news following the World Economic Forum in Nigeria. 

International Business Times by Kathleen Caulderwood

Nigeria, Africa’s largest economy, is attracting attention from investors around the world, especially from companies in fast-growing sectors like mobile banking and information technology (IT).

Despite continued problems with corruption and political instability, the country continues to have an impressive economic growth rate, a growing middle class and a skilled youth population that’s embracing a wave of technological development, which together make Nigeria a fertile ground for business. Nigeria’s prospects dominated the discussion among global policymakers and business leaders at the World Economic Forum (WEF) on Africa, which was held in Abuja, Nigeria’s capital, this week.

The group’s list of “Global Growth Companies” includes more than 360 firms from 65 countries, which the WEF’s experts believe have “clear potential to become global economic leaders” based on their business models, growth record, leadership and their respective markets.

“Although they come from a variety of market backgrounds, what brings them together is their ability to exceed industry standards in revenue growth, promote innovative business practices, and provide excellent track records of leadership and corporate global citizenship,” David Aikman, managing director of the World Economic Forum, wrote in a blog post.

Of the 16 new businesses added to the elite group this year, six are based in Nigeria and are in fast-growing sectors such as mobile banking, agriculture and IT. Here are thumbnail sketches of each one:

Interswitch Ltd 

Interswitch is a mobile-payment company that works with governments, banks and private companies to process payments and transactions through ATMs, kiosks and, most important, mobile phones.

Founded in 2001, the Lagos, Nigeria, company now has partnerships with 21 banks across Nigeria and works with partners across sub-Saharan Africa.

UAC of Nigeria PLC 

Founded in 1879 and incorporated by a subsidiary of Unilever in 1931, the company took its most recent name in 1973. Today, it’s a holding company for a variety of businesses in the food, beverage, real estate and logistics sectors, and it has lucrative partnerships with major regional companies.

Last year, its profit before taxes was $8.6 billion, up 30 percent from the year before, according to the company’s most recent financial report.

Computer Warehouse Group

Now one of the fastest-growing communication and technology companies in Nigeria, Computer Warehouse Group began with four staff members in 1992. Two decades later, it’s created offices in Ghana, Uganda and Cameroon “in pursuit of its pan-African vision,” according to the company’s website.

Computer Warehouse Group was listed on the Nigerian Stock Exchange in November 2013. Last year, the company’s revenues increased by 10 percent, and its after-tax profits grew by 81 percent.

Notore Chemical Industries Ltd 

Notore is a fertilizer and agriculture company that focuses on green development. Founded in 2005 and based in the strategic port of Onne on the Niger Delta, Notore operates the only plant in sub-Saharan Africa that manufactures urea, a by-product of the oil and gas industry.

“By making fertilizer more accessible to farmers through its supply chain and pricing, Notore is helping stimulate the local production of foods, such as rice and sugar,” wrote Forbes columnist Mfonobong Nsehe, who added that this type of business will decrease the country’s dependence on imports.

Seplat Petroleum Development Company PLC 

The Lagos-based oil company was formed by the merger of two smaller Nigerian companies in 2009. By the end of last year, it had 60 million barrels worth of reserves from its holdings in the Niger Delta.

In April, the company raised $500 million in its initial public offering, and although it currently pumps about 62,000 barrels of oil per day, it relies on Shell’s infrastructure to export its oil, according to Bloomberg.

Nagode Group

Nagode is a manufacturing, distribution and logistics firm based in Lagos. Incorporated in 1988, the company slowly diversified its business lines away from the  the textile industry. Today, its revenue is roughly $200 million per year, and it has offices in Cameroon, India, China, South Korea and the United Arab Emirates

Chinese Premier Li Keqiang Pledges Economic Support To Nigerian President Goodluck Jonathan During 4-Country Africa Tour


International Business Times by Kathleen Caulderwood

Despite recent reports that a slowdown in the Chinese economy could impact its huge commitment to its trade with Africa, Chinese Premier Li Keqiang promised to quadruple investment in the continent and strengthen trade ties with African countries while on a tour of African nations this week.

On his first visit to Africa since last year, Li pledged continued support for African economic growth while addressing critics who believe China’s presence in Africa isn’t always beneficial to the nations with which it partners.

“We hope to see not just more trade with China but also stronger cooperation between the two countries in the development of infrastructure in Nigeria,” Li said at a meeting with Nigerian president Goodluck Jonathan on Wednesday,according to Channel News Asia.

“We wish the Nigerian people even higher living standards and also greater achievement in terms of health and social progress,” he said.

Last year, trade between Nigeria and China hit $13.6 billion, according to a statement from the premier.

Li landed in Nigeria on Tuesday night, ahead of the World Economic Forum on Africa, a high-level meeting of officials, economists and politicians that will take place in Abuja until Friday.

Nigeria is just one stop on Li’s four-country tour of Africa, which began with a pledge to double trade volumes between China and Africa to $400 billion by 2020, while quadrupling Chinese investment in the continent to $100 billion.  

On Monday and Tuesday, Li met with officials in Ethiopia, where he discussed upcoming infrastructure investments at the headquarters of the African Union, a towering structure that was built by Chinese companies.

“The Chinese government proposes to establish joint-venture airlines between Chinese companies and Africa and provide civilian aircrafts to develop the regional aviation industry,” Li said at a meeting with officials at the Chinese-built headquarters of the African Union in Addis Ababa, Ethiopia, according to the South China Morning Post. “We will also set up a high-speed railway research and develop center.”

Li pointed to more sustainable growth projects and green development.

Ethiopia has long been an important investment destination for Chinese companies, even though it doesn’t have the oil reserves that some other African countries possess.

“Ethiopia has managed to grow very rapidly,” said Amadou Sy, senior fellow at Brookings’ Africa Growth Initiative, citing a large population and growing middle class.

“The country has no oil but may become an exporter of energy thanks to its bet on renewable energy,” he said, noting promising hydro and geothermal projects.

Sy said that a major Chinese investment from the Huajian Group in shoe manufacturing is set to employ more than 100,000 Ethiopians in the next 10 years.

The premier will also stop in Kenya, which has a fast-growing banking industry and a thriving information, communication and technology (ICT) sector, as does the oil-rich Angola.

As officials discuss plans for the future, China’s reputation has been a major talking point. Critics say that China is taking advantage of the resource-rich continent and that its commitment to African aid and investment is simply a new kind of “colonialism.”

A 2011 International Monetary Fund study shows that almost 30 percent of China’s investment in Africa went to mining projectsAnother report from experts at Johns Hopkins University shows that the majority of foreign direct investment from Chinese companies was in mining and manufacturing.

Rather than directly address those issues, the premier chose to emphasize China and Africa’s mutual growth and partnership.

“Since entering the new century, China and Africa have seized the historic opportunities presented by the deepening of globalization, worked together and helped each other to achieve a win-win outcome,” Li said inan interview published Wednesday.

Nigeria Must Cut Reliance on Oil Income, Finance Minister Says


Bloomberg Businessweek by Daniel Magnowski

Nigeria needs to diversify its income beyond oil exports by finding ways to generate more taxes from other industries, Finance Minister Ngozi Okonjo-Iweala said.

“We need to ramp up our efforts to tax the non-oil sectors of the economy to create more revenue for the government,” Okonjo-Iweala told reporters today in the capital, Abuja.

Nigeria, Africa’s biggest crude producer and its largest economy, relies on oil sales for about 70 percent of its income, a figure that should fall to 60 percent and eventually to 33 percent, she said.

Producers including Royal Dutch Shell Plc (RDSA) and Eni SpA (ENI), among others, operate in the country.

Nigeria, a country of about 170 million people, is a member of the Organization of Petroleum Exporting Countries. The government is targeting 7.2 trillion naira ($45 billion) in income from oil and gas this year.