Are things worse than we think?

I spent the weekend working on an alternative measure of economic activity for Nigeria. Something different from the regular run of the mill GDP. One new option is to measure economic activity by monitoring night lights from space. The basic idea is areas with more illumination at night are assumed to have more economic activity than areas with less illumination. You can read more about it here. It is a good alternative because it is mostly unbiased and can measure activity not just for countries but for smaller administrative districts. I have only compiled it for the entire country and will do the same for state and local governments soon.

Something very interesting shows up when comparing this alternative measure of economic activity to official GDP data. The graph below plots GDP and the light intensity index from 1992 to 2009. The graph speaks for itself.

I know what you are thinking. This probably has something to do with the NEPA situation. Comparing the light intensity index with data on net electricity generation in Nigeria from the Energy Information Administration show that this falling economic activity is not really about electricity. There is a relatively large improvement in electricity generation from about 2000 with no effect on economic activity.The light intensity index also takes into account other sources of night light that are not associated with NEPA. Light from private generators and even kerosene lanterns. This implies that NEPA alone is not responsible for the falling light intensity numbers.

Interesting stuff. If this light intensity index is actually a good measure of economic activity then those poverty numbers released last week actually make sense.