|
Getting your Trinity Audio player ready...
|
Full Text
A recent public disagreement between Bayo Onanuga, Nigeria’s presidential spokesperson, and Akinwumi Adesina, President of the African Development Bank (AfDB), has brought renewed attention to Nigeria’s economic history and the interpretation of Gross Domestic Product (GDP) per capita figures. Mr Adesina asserted that Nigeria’s GDP per capita in 1960 was $1,847, which he suggested was higher than the current level. He also implied that average prosperity in the country has declined since independence.
Mr Onanuga, however, challenged this claim, arguing that the 1960 GDP per capita was much lower, closer to $93, and that Nigeria’s average economic output per person has increased significantly over the decades.
Although all efforts to reach Mr Adesina for his data source have been unproductive, this disagreement highlights the importance of understanding GDP per capita’s true measurement and the context necessary for interpreting such figures accurately.
Understanding GDP Per Capita
GDP per capita is an economic indicator calculated by dividing a country’s gross domestic product (GDP) by population. In this context, GDP is the total monetary value of all goods and services produced within its borders in a given year.
This calculation yields an average economic output per person and is widely used to assess living standards and financial well-being. For example, if a country has a GDP of $500 billion and a population of 50 million, each person would be worth $10,000. While this formula appears simple, the interpretation of GDP per capita is more complex and depends on how GDP is measured.
Economists use several variations of GDP per capita to gain different insights. Nominal GDP per capita uses current market prices and does not adjust for inflation. This measurement can be misleading when comparing figures over time because rising prices can inflate GDP values without reflecting real growth in economic output.
On the other hand, real GDP per capita adjusts for inflation to address the lapse in the nominal calculations and generate a more accurate assessment of whether the average person’s economic well-being is genuinely improving. For instance, if nominal GDP per capita rises by 5% in a year but inflation is 4%, then the real increase in economic output per person is only 1%.
Purchasing Power Parity (PPP) adjusted GDP per capita considers differences in the cost of living between countries. This adjustment is crucial for international comparisons because a dollar or pound may buy more goods and services in one country than another, so PPP provides a more meaningful measure of the actual purchasing power of incomes across nations.
Relying solely on nominal GDP per capita can lead to erroneous conclusions. A country might appear wealthier in nominal terms due to inflation or currency fluctuations, but when adjusted for real purchasing power, the economic reality may be quite different.
Nigeria’s GDP Per Capita: A Historical Perspective
At the time of Nigeria’s independence in 1960, the country had an estimated GDP of $4.2 billion and a population of approximately 44.9 million. Dividing the GDP by the population yields a GDP per capita of roughly $93.54, validating Mr Onanuga’s response on a surface level. In the 1960s, Nigeria predominantly practised an agrarian economy, limited industrialisation, and nascent infrastructure. The economy was just beginning to develop, and income levels were modest by global standards.
The discovery and exploitation of oil reserves in the late 1950s and early 1960s marked a turning point. Oil revenues increased national income during the 1970s oil boom, spurred infrastructure development, urbanisation, and economic diversification efforts. By 1980, Nigeria’s GDP per capita had surpassed $880. After a GDP rebasing exercise that revised the size of the economy upwards, data from the World Bank revealed that the figure peaked at approximately $2,585.7 in 2015.
In recent years, Nigeria has faced economic challenges, including currency depreciation, fluctuating oil prices, and rapid population growth, which have tempered GDP per capita growth. As of 2023, Nigeria’s GDP was estimated at $363.85 billion, with a population of about 226.2 million, resulting in a GDP per capita of approximately $1,596.6. While this is lower than the 2015 peak, it still represents nearly a 17-fold increase from the 1960 figure.
Reconciling data and perception
GDP per capita is a much sought-after indicator when providing a broad snapshot of average economic output and comparing economic performance between countries or over time. Nigeria’s increase from around $93 in 1960 to over $1,600 in 2023 signals substantial economic growth and improved productivity on average. It helps policymakers and analysts identify trends and assess the impact of economic policies or external shocks.
However, GDP per capita has limitations. On average, it does not account for income distribution within a country. Nigeria has income inequality, with a Gini coefficient of 35.1 as of 2022, indicating that wealth is unevenly distributed. Also, significant disparities exist between urban centres such as Lagos and rural areas, meaning many Nigerians have not experienced the benefits suggested by average GDP per capita figures.
Moreover, GDP per capita does not capture non-economic dimensions of well-being such as health, education, access to clean water, or environmental quality. For example, Nigeria’s Human Development Index ranking of 163rd out of 191 countries in 2022 means economic output alone does not translate directly into overall human development or quality of life.
Currency fluctuations and inflation can distort nominal GDP per capita. Nigeria’s 2015 peak in GDP per capita partly shows a stronger naira before subsequent devaluations, which affected real purchasing power.
The conflicting claims between Adesina and Onanuga could arise from differences in data sources, measurement methods, or misunderstandings of economic terminology. Historical data show that Nigeria’s GDP per capita in 1960 was well below $100, and the subsequent decades have seen substantial growth.
However, perceptions of economic decline may stem from recent stagnation or decline in GDP per capita following the 2015 peak, rapid population growth that dilutes per capita gains, and persistent poverty and inequality, suggesting many Nigerians have not experienced improved living standards despite overall economic growth.
Experts wade in
Victor Aluyi, an economic expert and co-managing partner at Aztran Global Investment, emphasised the importance of examining real economic indicators, particularly the average Nigerian’s purchasing power. He said inflation over the last seven years has significantly affected Nigerians’ ability to afford rent, transportation, and food essentials.
Mr Aluyi also highlighted the relevance of broader human development indices, including access to education and healthcare, and the real value of the minimum wage. He said, “If you look at the minimum wage now, it’s about N70,000. A few years ago, it was N30,000. However, if you dollarise that, the N30,000 minimum wage is probably looking better from a purchasing power standpoint than the N70,000 minimum wage.” He said this shows the need to look beyond nominal figures and consider what people can buy with their income.
Joseph Ajibola, a professor of monetary economics at Caleb University, Lagos, said relying on data that does not correspond with everyday reality is distributive injustice, an economic term that describes the unfairness of reward within a system. He said, “If the GDP per capita only gets to the 10% minority who occupy positions of authority and neglect the 90% poor majority, whatever number is claimed is irrelevant.”
Mr Ajibola said, “Are Nigerians living better today than in 1960, if we analyse the reality based on the human development index? The answer is obviously no.” He acknowledged that while technological progress has improved access to information and services, the real test is comparing what people could afford then and now. “Someone earning one pound then could afford to buy a car or a house, as opposed to how much you need to earn to buy a house or car today. Those are the questions that need to be asked.”
Ajibola urged the government to devise policies and programmes to relieve the ordinary Nigerian citizens and alleviate poverty. He said real improvements must match economic indicators in people’s quality of life. “If the economy’s not catching up in terms of the real situation in people’s lives, then there must be some kind of issue along the way in terms of that policy coming as a pass-through to people,” he said.
Conclusion
Despite its importance, GDP per capita alone cannot capture the complexities of the country’s income inequality, poverty, or human development challenges. Available data about Nigeria’s GDP per capita requires more analysis to conclude its impact on the average citizen’s daily existence.
