Will Nigeria snatch ‘largest African economy’ crown from South Africa?
When Nigeria publishes the preliminary rebased gross domestic product (GDP) figures due out tomorrow, the results may show the size of the economy jumping by 40 percent. (Image: NLNG)
That population is more a boon than a bane will be more than proved in the case of the booming West African economy of Nigeria, which is expected to win the title of the largest economy in Africa, propelled by huge domestic demand.
Similar to China and India, which are taking over the Asian, and global, markets, on the back of the largest and second largest populations respectively in the world, Nigerians are giving the rest of Africa a run for their money.
For South Africa, till now the undisputed leader in the continent, this will come as a setback, but the announcement itself should come as little surprise.
The National Bureau of Statistics at Nigeria is seeking to change the calculations of Nigeria’s GDP, using a new base year of 2010 to give a better indication of the size and composition of its economy. Nigeria has not done so since 1990, suggesting that the previous GDP framework underestimated economic activity.
The rebasing is expected to increase the estimated size of the Nigerian economy by 40 percent, which would boost the economy from about $273 billion to about $382 billion.
Incidentally, Nigeria and South Africa together constitute as much as half of Sub-Saharan Africa’s GDP.
But, South Africa’s economy, which was earlier estimated to close the year at a GDP of $393.96 billion, is displaying ever slowing growth. In the third quarter of 2013, South African economy expanded an annualized seasonally adjusted 0.7 percent over the previous quarter, down from 3.2 percent in the previous three-month period and well below market expectations. It is the lowest growth rate recorded in the last four years, as the strikes in the automotive sector dragged manufacturing down.
Nigeria, with nearly one-fourth of the population of Sub-Saharan Africa at 174.50 million and more than three times that of South Africa at 52.98 million, generates far more domestic demand than the rest of the economies in the emerging continent.
Besides showcasing the booming economy to the rest of the world, there is internal pressure too on the government of Nigeria to review economic data. 2015 is expected to be an election year, and President Goodluck Jonathan’s supporters are pushing for recalibration of data as it be a point of national pride if Nigeria leaves behind South Africa in the race for Africa’s strongest economy.
However, even as the economy as a whole presents a strong front, there are multiple chinks in its armor. For one, the gap between rich and poor is alarming in its extremity in Nigeria, still one of the world’s poorest nations on a per capita basis. While the middle class is emerging strong, the West African economy continues to have millions who are sunk in poverty and are living on less than $2 a day.
While Nigeria’s per-capita GDP of $2,420 is above the $1,580 median among 27 countries Gallup surveyed in the region, however, South Africa’s GDP per person at $11,190 far exceeds that of the emerging West African economy.
But, with Nigeria being the reference point for West Africa, it is critical for the region as a whole that the booming economy should continue its upward trajectory.
So, for now, it is not really about a race between Nigeria and South Africa to see which economy comes first. But, it is critical for Nigeria’s millions to have a growing economy to push them out of the clutches of poverty, and at the most populous state of Nigeria, the fate of the West African economy determines that of the region as a whole.
Ultimately, as Nigeria rounds the bend and becomes the largest economy of Africa, West Africa will also ride the wave of economic prosperity.