Sa Vs Nigerian Gdp

S.A vs Nigerian GDP[pic 1]

(990 words)

The measure of the Growth Domestic Product tells us about a country’s economy and how productive they can be. According to Picardo (2013: 1), it is one of the most crucial and most used measures of an economy’s production and output. It gives us a comparison of the economy’s state to the previous year of quarter. It gives one a good indication of how big a country’s economy is like and if it is going to expand or contract. It lets us know if an economic threat like the recession or inflation is on the horizon, based on the performance and the overall state of the economy.  

Methods of GDP Calculation

[pic 2]

Adapted from Parkin et al. (2010: 457)

The GDP can be calculated by either the expenditure method or the income method.  Both methods, when measured accurately, can meet the same total. The Monetary value of goods and services bought or produced in a given period are measured (International Monetary Fund, 2012). The total expenditure method, also known as the aggregate expenditure according to Parkin et al. (2013: 459), is defined as the true value of planned goods and services produced in an economy.  All the outputs generated within the borders of a country are counted. The expenditure method, in a nutshell, adds up all the purchases of a user. These purchases include medical services by a household, mobile services, food consumption and government costs. The formula for calculating the expenditure is C + I + G + (X-M). Consumption expenditure is all the payments for goods and services by consumers. Investments according to Parkin et al. (2010: 469) are expenditures on capital equipment. Government expenditure is incurred when the government buys goods and services.

The Income approach is used to sum up all the incomes that firms pay households for the four factors of productions that are hired. The formula in its simplest form is wages + interest + rent + profit. All of these factors are known as factor incomes. There is another formula that is used when one considers the market price; Factor incomes + indirect taxes – (subsidies + depreciation). Subsidies make the income surpass the market value which means that they need to be subtracted. Indirect taxes are sort of similar to VAT. It is a part of the market price that is available as Gross Income. Depreciation is the amount or value that must be invested to maintain capital and capital stock or equipment.

Nigerian GDP

Nigeria has overtaken South Africa as the leading economy in Africa. There are many factors that played a crucial role in ensuring that this was possible. Many would think that this means that the welfare and living conditions in Nigeria are better than South Africa in some respects. That is not the case. This does not mean that the welfare of Nigerian people has increased. When one figures out the welfare of the people and the resources in a country, we consider using real GDP. Real GDP is used for 3 main purposes: Economic welfare comparisons over a period of time, economic welfare across countries and forecasting business cycles. In this case, the GDP is not a perfect measure for any of them. GDP leaves out some important information about welfare. According to Parkin et al. (2010: 476), GDP does not look at environmental quality, household production, illegal activity, quality improvements, social justice and political freedom. Nigeria is facing some social problems that will have a big impact in the people’s welfare.

As for rebasing, Yemi Kale, head of the National Bureau of Statistics in Nigeria, stated that rebasing does not change what was there already and that there was no miraculous event that occurred in 24 hours (Bloomberg, 2014). The Economist explains that Nigerian people are no richer than they were before all the GDP calculations took place (The Economist, 2014).  The growth in GDP does not mean that job creation and individual incomes will increase (ThisDayLive, 2014). It means that better economic decisions should be taken in the future and all the social problems in the country must be eradicated.