By Jeph Ajobaju, Chief Copy Editor
Nigeria’s economy, though monolithic – as oil accounts for 90 per cent of exports – remains the biggest in Africa, relegating that of South Africa to second place, whichever metrics are used.
South Africa, which does not have oil, and thrives on manufacturing and agricultural exports, once topped the continent’s economy.
But in 2014, Nigeria changed its economic analysis to account for rapidly growing contributors to its Gross Domestic Product (GDP), such as telecommunications, banking, and its film industry – to claim the top spot.
South Africa is in recession, but that is not the only reason it is in second place.
As if a recession was not enough bad news for South Africa, it is now confirmed as the continent’s second-largest economy.
The answer to the question of whether South Africa or Nigeria, the two countries that account for almost half of Africa’s GDP, is the biggest economy on the continent has long depended on which exchange rate you use for Nigeria.
But now, as Bloomberg reports, both the official naira rate of N306 per dollar and the weaker market exchange rate of around N360 that almost all investors use put Nigeria on top.
Nigeria’s economy is the biggest in Africa, whichever naira rate is used.
Its economic growth beat forecasts in the fourth quarter, helping the economy to expand the most in four years in 2019 as oil output increased and the Central Bank of Nigeria (CBN) took steps to boost credit growth.
Nigeria’s GDP stood at $476 billion or $402 billion, depending on the rate used.
South Africa’s economy went in the opposite direction.
It slumped into a second recession in consecutive years, contracting more than projected in the fourth quarter as power cuts weighed on output and business confidence.
For the full year, expansion was 0.2 per cent, the least since the global financial crisis, and even less than the central bank and government estimated.
Based on an average rand-dollar exchange rate of 14.43 for the year, GDP was $352 billion.
South Africa’s weak growth adds to pressure on the central bank to lower the benchmark interest rate at its Monetary Policy Committee meeting March 19, especially after the US Federal Reserve’s emergency rate cut on March 3 amid risks from the spread of the coronavirus.
Projections show Nigeria’s economy will continue to grow faster than South Africa’s.
The International Monetary Fund (IMF) cut its forecast for Nigeria’s 2020 growth to 2 per cent from 2.5 per cent last month, due to lower oil prices.
But South Africa’s GDP is forecast to expand only 0.8 per cent.
