Deep in the hinterlands of Edo, one of Nigeria’s sprawling metropolis, the Nigeria customs service lay ambush for oncoming trucks carrying contraband goods brought from the nearby West African state, Benin republic.
In the fleet of trucks apprehended were hordes of frozen poultry products, bales of second hand clothes, shoes, furniture and used tyres - all estimated at a cost of around $1.5 million. The customs service says it has confiscated thousands of goods worth billions within its three months of recent crackdown in the Edo smuggling route. The service estimates that Nigeria has over 1400 illegal trade routes which smugglers use to move goods in and out of the country almost every week. While there is no clear official figure, some estimates put Nigeria’s contraband trade at over $2 billion per year. Combine that with $7 billion lost each year to oil theft in the creeks of Niger Delta according to estimates by Shell petroleum – and that’s not all.
The majority of Nigeria’s food production, services, trade and light goods manufacturing are operating within the informal sector and are mostly unaccounted for in the country’s annual GDP calculations. A recent data by the IMF suggests that Nigeria is a country that thrives on its shadow economy which is around 68% of total GDP.
The wrong calculation of the country’s GDP should not matter if not that the GDP is a tool used to estimate a country’s aggregate consumption and it is the tool used to calculate economic performance and growth when identifying the strength of a country and the welfare of its citizens.
Based on the country’s largely black economy, Nigeria is one that is overly underestimated in official estimates, economic forecasts and statistics. The country’s GDP calculation is also based on 1990 prices meaning that when rebased sometime in 2013 to reflect current prices; Nigeria’s GDP could see a rise of up to 40% which would mean that it would trail that of South Africa which has a GDP worth of around $420 and Nigeria when rebased; $390 billion. Still, when Nigeria’s GDP is rebased, a significant part of the informal economy would remain largely unaccounted for in the official calculation.
If Nigeria’s GDP displaces that of South Africa which would likely be the case by 2016 Nigeria could cause a rewrite of the BRICS acronym to BRINCS, the club of emerging markets consisting of (Brazil, Russia, India, China and South Africa).
Displacing South Africa as the economic power house of Africa as early as 2016 may be seen as a mere wishful thinking but few pointers would say otherwise. First, South Africa’s economy has been hurt in the last few years and it has barely seen a growth of 2.5% annually yet Nigeria inspite of all its problems has seen an average of 5% growth. Second, if those who govern Nigeria simply renew their commitment to reforms by formalising part of the black economy, the country could see yet another rise in its GDP level as the shadow market already accounts for major part of the Nigerian market. Third, Nigeria’s annual growth in the next coming years will continue to triple that of South Africa with current GDP growth rates and projection. This implies that in 3-4 years Nigeria will match South Africa by GDP.
Nigeria’s possible ascendancy into the BRICS would not only defy litany of negative estimates and statistics concocted by economists and institutions alike. The country’s case would be one of a powerful and emerging underdog long underrated. Ascending to the comity of BRICs would not end the deep seated corruption in the country; neither will it be the end to poverty. What the ascension will surely do is open up the country to a better atmosphere of economic opportunism, growth and a better and brighter future.
Few days back, the BRICS finalised the launching of its own version of a global development bank to rival the World Bank with a $50 billion capital in what is called a new banking system that would offer a new way of dealing with developing countries from around the world. The bank will offer emergency currency funds, development loans and other trade mechanisms that will give flexibility and other advantages to developing countries with fewer strings attached. It is this form of banking system that a developing country like Nigeria would need in an era of commodity price fluctuation and falling value of the dollar and euro. Nigeria may also be able to trade with other members and other developing allies in lighter terms than the developed west – and that is a better path to growth.
Provided that Nigeria gets it right politically within the current decade, the country’s story could be one of prosperity and many successes despite the current high tension and gloomy pictures of poverty and corruption. In a Goldman Sachs paper: N11 more than an acronym, Nigeria along other next emerging markets are estimated to grow at 4% annually but a politically stable Nigeria if we account for current infrastructural, transportation and food production deficit can achieve a growth of over 10% annually in coming years.
As of 2012 a growth of 6.7% was achieved, yet such growth was audacious in the midst of slow global economic growth, home grown terrorism and falling oil trade.
Many critics would argue that in an economy where 60% of the population are impoverished with everything in the negative - a rate of 10% growth is inconceivable. Critics may be right looking at the key pictures of horror and negativities that has characterised the country in recent years, but the positive growth can be accounted for with the fact that Nigeria has one of the fastest growing construction industry in the world, a thriving oil and gas market, rising service industry and a financial industry that is emerging.
The need to meet current deficits in infrastructure, food production, housing, education as well as energy will drive huge growth in coming years and if the political economy becomes stable. Nigeria is a country of endless opportunties which would attract international investment for many years. A 10% annual growth rate for instance would mean that Nigeria would emerge faster than several G-7 nations combined. Such growth could also put Nigeria ahead of growth of other BRICS members.
The world is waiting to surprised.
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