Nigeria is now Africa’s biggest economy, with oil helping its economy grow more than forecast at the end of last year.
Nigeria’s re-emergence as Africa’s biggest economy followed South Africa’s slump into its second recession in two years, as severe rolling power blackouts frustrate President Cyril Ramaphosa’s attempt to revive growth.
The answer to the question of whether South Africa or Nigeria, the two countries that account for almost half of sub-Saharan Africa’s gross domestic product, is the biggest economy on the continent has long depended on which exchange rate you use for the West African nation.
But now both the official naira rate of 306 per dollar and the weaker market exchange rate of around 360 that almost all investors use put Nigeria on top.
Nigeria’s economic growth beat forecasts in the fourth quarter, helping its economy to expand the most in four years in 2019 as oil output increased and the central bank took steps to boost credit growth.
GDP in the West African country stood at $476 billion or $402 billion, depending on the rate used.
South Africa Economic Outlook:
The South African economy contracted 1.4 per cent in the fourth quarter of 2019, according to official statistics, far outpacing analysts’ forecast of a 0.2 per cent decline.
The latest gross domestic product (GDP) figures, released by Stats SA, showed that the economy contracted by 1.4 per cent in the fourth quarter of 2019, which followed a contraction of 0.8 per cent in the third quarter of last year.
In addition to the shrinking economy, seven out of 10 industries in South Africa contracted in the fourth quarter as well. Only finance, mining and personal services grew, but not enough to prevent the country from falling into an inevitable recession.
The main sectors that hindered economic growth included the transport and the communications industry, which shrunk by 7.2 per cent and contributed to the 1.4 per cent fall in GDP.
The largest sector to contribute to South Africa’s recession was construction, which has declined for six consecutive quarters. However, agriculture also proved to be the economy’s main drag in 2019.
Re-emergence of Nigeria as Africa’s biggest economy:
A key regional player in West Africa, Nigeria accounts for about half of West Africa’s population with approximately 202 million people and one of the largest populations of youth in the world. Nigeria is a multi-ethnic and culturally diverse federation which consists of 36 autonomous states and the Federal Capital Territory. With an abundance of natural resources, it is Africa’s biggest oil exporter and has the largest natural gas reserves on the continent.
Moreover, the Nigerian economy exited recession in 2017, the country’s economic growth has not been a fluke but a result of deliberate practices and policies of the Buhari administration.
It has increased transparency in governance, diversification of the economy away from oil, improved fiscal management and a healthy protectionist approach which has aided the growth and increased the capacity of domestic producers and in turn, created jobs.
According to APC, the hugely successful anti-corruption efforts such as the implementation of a Treasury Single Account (TSA) that allows the government to better track and manage its resources and a more transparent government payroll and made more cash available for critical infrastructure projects.
Projections show Nigeria’s economy will continue to grow faster than South Africa’s. While the International Monetary Fund cut its forecast for Nigeria’s 2020 growth to 2% from 2.5% the last month, due to lower oil prices, South Africa’s GDP is forecast to expand only 0.8%.
It depends on implementing the Economic Recovery and Growth Plan (2017-20), which emphasizes economic diversification.
Nigeria has many opportunities to transform its economy, particularly in agro-processing. Special agro-processing zones could promote agroindustrial development and employment.