A new report by London-based group, World Economics, has indicated that Nigeria’s Gross Domestic Product (GDP) by Purchasing Parity Terms (PPP) could be as large as $2.419 trillion, in contrast to official estimates of $1.277 trillion at the end of 2023.
According to the organisation which provides analysis, data, and insight on the world economy, based on its deployment of the PPP model of calculating nations’ GDP, Nigeria’s economy is the 19th largest in the world.
PPP is a measure of the price of specific goods in different countries and it’s used to compare the purchasing power of countries’ currencies.
The London-based group placed Nigeria’s GDP by its purchasing power parity only behind China with about $39 trillion; US with $26.1 trillion; India which it said has $20.4 trillion GDP by PPP as well as Russia with $8 trillion as its GDP using the methodology.
Others include: Japan ($6.2 trillion); Germany ($5.8 trillion); Indonesia ($5.5 trillion); Brazil ($5.2 trillion); France ($4.2 trillion); United Kingdom ($4 trillion) and Mexico ($3.9 trillion).
Also listed were: Turkey ($3.87 trillion); Italy ($3.83 trillion); Korea Republic ($3.2 trillion); Egypt ($2.9 trillion); Spain ($2.7 trillion); Saudi Arabia ($2.6 trillion) and Canada ($2.47 trillion).
But commenting on the latest estimates for GDP in PPP adjusted for the base year and informal economy, the Managing Director/Chief Executive Officer, Financial Derivatives Company Limited (FDC) Mr. Bismarck Rewane, described it as a ‘fantasy.’
He said: “You don’t just wake up and throw figures. At $2.4 trillion, that makes us almost 3 per cent of global GDP and you believe that? I don’t see the basis for that. So, it means we are to grow by a multiple of 10? In other words, we moved from $369 billion to $2.4 trillion, which means we would be 10 times larger.
“I don’t see what type of high-heeled shoes can make you 10 times taller than what you are. Rebasing to a large extent is cosmetic and GDP is not measured based on PPP. Today, our PPP is about $1 trillion and you are doubling it based on what?”
According to him, countries do not compare GDP based on PPP, but on real GDP, cautioning against introducing another methodology and questioning why countries like USA, China, and other countries do not compute their GDP based on PPP.
“And anytime you tell me you are changing the methodology of something, it doesn’t make sense. Use the same methodology so that you can compare oranges with oranges,” he argued.
Rewane insisted that there are three methods of computing GDP, namely: Output, expenditure and income approach, which he said are standard methods all over the world.
But World Economics stressed that there are three good reasons for believing that classic GDP data seriously underestimates GDP, arguing that many government statistics offices produce seriously out of date numbers, using Base Years that are so many years out of date and cannot accurately reflect economic activity.
“The massive increase in the size of the digital economy – for example – cannot be reflected in data based on a pattern of sector activity over 10 years old. World Economics has developed a method for uplifting economic data for years-out-of-date Base Years, based on past experience,” it said.
Second, it argued that most economic data fail to include data covering Shadow or Informal sector activity, ranging from untaxed and unmonitored legal activities through to black markets, “off the books” cash transactions, and criminal activities including prohibited drugs.
Third, it maintained that many GDP country comparisons are made using market exchange rates, which fail to capture the true purchasing power of individual currencies.
The organisation’s data also highlighted that going by the PPP model, Egypt has the largest economy in Africa, with about$2.91 trillion, Nigeria is second with $2.41 trillion and South Africa is third with $1.27 trillion.
Emmanuel Addeh
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