When Is GDP Per Capita Useful? A More Complete View of Living Standards in Nigeria

Aayat Hafezjee

 

In Part 1 of this blog series, we explored why GDP per capita is an imperfect and often misleading measure of living standards in Nigeria. We saw how it overlooks income inequality, informal employment, and access to essential public services. However, this does not mean that GDP per capita is without value. On the contrary, when used alongside other indicators and interpreted with caution, it can still offer useful insights into aspects of a country’s economic performance. 

In this second part, we will discuss when GDP per capita is helpful, how it can complement other measures, and why a more holistic approach is needed to truly understand living standards in Nigeria.  

 

When Is GDP Per Capita Useful? 

Despite its well-documented flaws, GDP per capita remains a useful tool, if interpreted with caution and used in the correct context: 

  • GDP per capita helps track trends in macroeconomics. For example, Nigeria’s GDP per capita rose steadily between 2000 and 2014, largely driven by an oil boom, but has since stagnated (NBS, 2023). This broad trajectory shows overall economic cycles, even if it does not capture how growth is distributed across the population. 

 

  • Being used as a comparative benchmark, GDP per capita allows us to situate Nigeria within the global economy. It tells us that Nigeria is, on average, wealthier than Chad or Niger but lags behind countries like South Africa. However, this is a high-level comparison that says little about actual well-being or inequality within each country. 

 

  • Policymakers can use GDP per capita to observe macroeconomic performance, set targets, and compare progress over time. But it is crucial to recognise that this metric does not account for distribution of wealth, poverty levels, or access to essential services.



Why Complementary Indicators Matter 

To truly understand living standards, GDP per capita must be combined with more indicators: 

  • Human Development Index (HDI) 
    The HDI offers a broader view, combining income, education, and life expectancy. Nigeria’s HDI stands at 0.560, ranking 164th out of 191 countries (UNDP, 2023). This paints a far more nuanced picture of human well-being than income alone. 

 

  • Multidimensional Poverty Index (MPI) 
    The MPI captures deprivations across key aspects of life: access to water, sanitation, electricity, education, and healthcare. Alarmingly, 63% of Nigerians are classified as multidimensionally poor (UNDP, 2023). This stark reality is not reflected in GDP per capita figures. 

Together, these indicators offer a richer, more accurate understanding of the day to day realities faced by millions of Nigerians. They expose how a rising GDP per capita can mask deep inequalities and persistent poverty. 

 Conclusion

To conclude, to truly measure living standards, GDP per capita must be combined with more holistic indicators like the HDI, MPI, and inequality data. Because, as Nigeria shows us, a rising average means little if millions remain in poverty. 

References:  

  • NBS (2023) National Accounts Report Q4 2023. National Bureau of Statistics, Nigeria. 

  • UNDP (2023) Human Development Report 2023. United Nations Development Programme. Available at: https://hdr.undp.org 

  • WHO (2023) Nigeria Country Health Profile. World Health Organisation. Available at: https://www.who.int 


About the author

Aayat Hafezjee studies Environmental Sciences and Business Management, with a strong interest in Economics, originally sparked by Richard Thalers, ‘Misbehaving’. She’s interned widely, including at BNP Paribas in Finance, and has spent nearly 2 years employed as a Business Operations Specialist alongside her studies. She’s very active in the Economics field and serves as the Economics Blog Ambassador at Queen Mary University of London. Feel free to email Aayat at: a.hafezjee@hss24.qmul.ac.uk.

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