Nigeria has announced plans to adjust its method of calculating Gross Domestic Product (GDP) by incorporating illegal, informal, and unreported economic activities. This adjustment comes as the country grapples with extensive corruption, black market dealings, and a wide range of hidden economic activities that have long been underreported in official economic statistics.
According to Baba Madu, the head of the National Bureau of Statistics’ national accounts division, the informal economy—encompassing illicit trade, unreported labor, and other underground sectors—has long played a critical role in the country’s overall economic framework. Madu pointed out, “There are economic activities that have no legal backing. The practitioners earn income from them and sometimes live larger than those in the formal sector. At the end of the day, the income earned impacts the formal economy.”
This decision to revise Nigeria’s GDP calculation is aimed at providing a more accurate reflection of the country’s true economic health. By including previously neglected sectors, the recalculation could result in a considerably higher GDP figure than what is currently reported, offering a clearer picture of the economy’s actual size and impact.
The recalculation is timely as Nigeria, which once held the title of Africa’s largest economy, has seen a decline in its ranking to fourth place on the continent. Despite these shifts, the inclusion of illegal and informal economic activities is expected to significantly boost Nigeria’s reported economic standing. This update will also help provide policymakers with better insights into the full scope of the country’s economic performance.
In practice, Nigeria’s informal economy is vast and varied, including everything from street vending and unregistered labor to illegal activities such as smuggling and unauthorized oil refining. While these activities often operate outside legal frameworks, they are a major source of income and employment for millions of Nigerians, sometimes providing more stability than the formal sector.
By revising its GDP calculation, Nigeria aims to align its methods with international standards that also account for the informal and hidden economies in other countries. The government expects that this adjustment will help foster more accurate data for economic planning and attract international investors by revealing the full extent of Nigeria’s economic activities.
The last major update to Nigeria’s GDP calculation was in 2014. Since then, the economy has experienced growth and challenges, and the inclusion of illegal and informal sectors in GDP is seen as a necessary step for gaining a more comprehensive understanding of the economic landscape.
While the full effects of this revision are still unfolding, it is expected to play a crucial role in shaping future economic policies and better addressing issues like poverty, inequality, and unemployment. The move highlights the growing recognition that informal economic activities are integral to understanding the true state of an economy, especially in a country where a large portion of the population participates in the informal sector.
