Nigeria surpasses SA as Africa’s top economy – what does it mean?

2014-04-07 09:18

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Abuja, Nigeria – Nigeria has overtaken South Africa as Africa's largest economy after a rebasing calculation almost doubled its gross domestic product to more than $500 billion (R5.5 trillion).

GDP for 2013 in Africa's top oil producer was 80.22 trillion naira, or $509.9 billion, the Nigeria Bureau of Statistics said yesterday, up from the 42.3 trillion naira estimated before the rebasing.

The new figure shrank Nigeria's debt-to-GDP ratio to 11% for 2013, against 19% in 2012, statistics chief Yemi Kale told reporters in the capital of Abuja.

Most governments overhaul GDP calculations every few years to reflect changes in output, but Nigeria had not done so since 1990, so sectors such as e-commerce, mobile phones and its prolific Nollywood film industry – now worth 1.4% of GDP, Kale said – had to be factored in to give a better picture.

Growing attention from foreign investors was forcing Nigeria to more accurately calculate its statistics, including GDP, Kale said, adding that the base year would now be recalibrated every five years, in line with global norms.

Nigeria, Africa's most populous country with 170 million people, has been growing as an investment destination owing to the size of its consumer market and growing capital markets.

Analysts said the recalculated GDP would raise Nigeria's profile, but change little on the ground.

“Is the money in your bank account more on Sunday than it was on Saturday? If you had no job yesterday, are you going to have a job today?” asked Bismarck Rewane, CEO of Lagos-based consultancy Financial Derivatives.

“If the answer to those questions is ‘no’, then this is an exercise in vanity,” he added, though he said the new figure was more accurate.

Nigeria's taking the title of Africa's biggest economy will fuel a longstanding rivalry with South Africa.

South Africa currently represents Africa at the G20, as well as in the Brics group of the most powerful emerging economies, which also includes Brazil, Russia, India and China. Nigeria may argue that it should join those clubs too.

It will also enliven competition for investor capital at a time when South Africa faces challenges such as striking workers and high current account and budget deficits.

Despite its roaring growth of recent years and now a bigger GDP, Nigeria still trails South Africa in basic infrastructure – power and roads – necessary to lift its people out of poverty.

Its mobile telephone network is one of the least reliable in Africa, internet quality is poor, roads are potholed and its ports and airports are clogged by bad infrastructure and obstructive officials. The power grid provides for barely four hours of electricity a day.

South Africa, by contrast, is seen as one of few African destinations where the rule of law safeguards investments.

By every measure, South Africa has a more sophisticated, developed and diversified economy, with advanced financial markets, while Nigeria relies heavily on oil. But investors say South Africa cannot afford to be complacent.

“South Africa was historically the ‘go-to’ country for investment in Africa. However, the reality is that other regions are increasingly asserting their economic voice,” said Roelof Horne, a portfolio manager at Investec Asset Management in Cape Town.

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