March 18 (Bloomberg) -- As Nigeria gets richer, more Nigerians live in poverty. That’s the paradox of growth in Africa’s biggest oil producer, its most populous nation and which, as of March 31, may be its top-ranked economy.
The National Bureau of Statistics is recalculating the value of gross domestic product based on production patterns in 2010, the first time it’s overhauled the data in two decades. That may boost the size of the economy by as much as 60 percent to between $384 billion and $424 billion, according to London-based Renaissance Capital Ltd., putting Nigeria ahead of South Africa and close to Austria and Thailand in the World Bank’s global league table.
Yet the most recent poverty survey by the Nigerian statistics agency, published in 2012, shows that 61 percent of Nigerians were living on less than a dollar a day in 2010, up from 52 percent in 2004. In the desert north, where Amnesty International estimates more than 600 people have been killed this year as the government struggles to quell a violent Islamist insurgency, poverty is even more stark.
“Reducing poverty and inequality requires not just economic growth but also job creation and investment in improving the productive capacity of the economy and its people,” Giulia Pellegrini, sub-Saharan Africa economist at JPMorgan Chase & Co. in London, said in an e-mail.
These tensions underscore the shortcomings of the region’s economic powerhouse, whose growth potential has spurred investment from Cincinnati-based Procter & Gamble Co. to MTN Group Ltd., Africa’s biggest mobile-phone operator. While Nigeria’s economy has expanded 6 percent a year since 2006, according to the World Bank, the nation’s power supply is less than a 10th of South Africa’s.
Nigeria’s benchmark stock index has dropped 12 percent since the beginning of the year, after surging 47 percent in 2013. The currency fell 0.1 percent to 164.82 per dollar at 2:06 p.m. in Lagos, the commercial capital, extending this year’s losses to 2.7 percent.
Oil production is concentrated in the south, with revenue accounting for about 80 percent of government funds and more than 95 percent of foreign income, according to the Finance Ministry. The government anticipates oil and gas income of 7.16 trillion naira ($44 billion) in 2014.
Joblessness among young Nigerians may undermine economic progress in a nation where 23.9 percent of the working population is unemployed, according to data from the Central Intelligence Agency’s World Factbook. It estimates that 62 percent of the nation’s 177 million people are below the age of 25.
“The large number of underemployed youth is a serious threat to the economic and political stability of the country. The median age in Nigeria is 14, and the population continues to grow at a rate close to 3 percent” a year, John Litwack, the World Bank’s lead economist for Nigeria, said by e-mail.
On March 15, seven young jobseekers were killed in a stampede at an immigration service recruitment day in Abuja. Another eight people died in crowds at recruitment drives in three other cities.
The north is particularly vulnerable with poverty rates estimated at about 80 percent, according to Oyin Anubi, sub-Saharan Africa economist at Bank of America Merrill Lynch in London.
The government says its Federal Initiative for the North East will revive schools, health services and farming, in a region where poverty and lack of opportunity have bred a sense of alienation. Islamist militant group Boko Haram has sought to exploit that sentiment in order to destabilize the government, conducting a deadly campaign of bomb and gun attacks since 2009.
“Unequal distribution of this oil wealth has contributed to a persistent inequality problem,” Anubi said in an e-mailed response to questions. Poverty poses “a risk to the stability of that region.”
One reason why tens of millions of Nigerians still live in poverty is that growth has been concentrated on sectors that are less labor-intensive, such as oil, telecommunications, and banking. Development of agriculture, the biggest employer in the economy, has been largely ignored by the government until recently, said Funmi Akinluyi, investment director at Silk Invest, a frontier markets specialist based in London.
“Growth in Nigeria has not been inclusive in decades,” she said in an e-mail. “Once agriculture gets the traction it needs we will have a stronger and a more diverse economy.”
Paul Nwabuikwu, spokesman for Finance Minister Ngozi Okonjo-Iweala, said in a Feb. 26 statement that there have been “visible achievements in roads, rail, power privatization, agriculture and job creation programs.”
While the boost to GDP may improve the investment outlook for Nigeria, social progress is slow. Nigeria is, along with Afghanistan and Pakistan, one of only three countries in the world where polio is still endemic, according to the International Federation of Red Cross and Red Crescent Societies.
The U.S. and U.K., fearful of terrorism and kidnapping, warn their citizens to stay away from huge swathes of the country, while the World Bank’s most recent Ease of Doing Business survey in June ranked Nigeria at 147, only marginally better than Iraq and Sudan. By contrast, South Africa was at 41 and Ghana 67.
Nigeria was listed at 144th out of 177 countries on Transparency International’s Corruption Perception Index last year.
Nigeria’s leap up the wealth league table may intensify scrutiny of President Goodluck Jonathan’s administration.
“The greater economic visibility should place more pressure on the Federal Government to undertake economic reforms, infrastructure, job creation, necessary to sustain the current trajectory of GDP growth,” Adewale Okunrinboye, an analyst at Lagos-based ARM Asset Management, which manages the equivalent of about $2.7 billion in assets, said in an e-mailed response to questions.
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