South Africa could soon lose its status as Africa’s biggest economy to Nigeria, but in the race to be the continental powerhouse being biggest may not be everything.
Nigeria, Africa’s No. 1 oil producer, will complete a rebasing of its gross domestic product (GDP) by next month, its statistics office says, which economists estimate could expand the size of its economy by between 20 and 60 percent.
This exercise, which has missed a string of previous deadlines, looks set to transform Nigeria into the continent’s most important economy measured in terms of GDP size.
With a current economic output of around $290 billion, the West African country – whose population is more than three times the size of South Africa’s 51 million – already boasts faster growth.
While it has expanded by an average of 7 percent annually over the past decade, South Africa has averaged 3 percent growth, held back by rigid employment laws and recurringlabour unrest.
But even if it slips from the top spot, South Africa can still claim the crown of being the more diversified and sophisticated economy. Its financial markets are among the world’s most advanced and while its $350 billion economy is smaller than Mexico and Indonesia, its stock market is larger.
For Nigeria, the aim of the rebasing exercise is to change the base year for calculating output to 2008 from 1990 to reflect sectors of the economy that have since grown in importance, such as telecoms and IT.
However, it is still heavily reliant on oil exports, accounting for some 80 percent of government revenue, and an enlarged GDP will do little to immediately improve life for nearly 100 million of its citizens who live on less than $1 a day.
While agriculture and power sector reforms would improve Nigeria’s fortunes, turbulent politics and a resilient and bloody Boko Haram insurgency in its north take some of the shine off its positive growth story.
Whenever it happens, Nigeria overtaking South Africa as Africa’s economic top dog is “kind of everything and nothing,” said David Cowan, Citigroup’s Africa economist.
“It is everything because you are then the largest economy in Africa so there’s a lot of kudos attached to that. But the reality remains that, on the ground, for every Nigerian there’s no difference … South Africa can still call itself the most sophisticated economy in Africa.”
South Africa’s expected retreat in the GDP ranking will nevertheless be a big psychological adjustment for a country that has often taken its lead position for granted.
It may also have geopolitical implications, raising questions about whether South Africa should be the sole African representative in the G20 and the BRICS group of the most powerful emerging economies, which includes Brazil, Russia, India and China.
Nigeria has been included in the freshly coined MINT group of emerging economic giants, along with Mexico, Indonesia and Turkey.