Nigeria has overtaken South Africa as the continent’s largest economy after the fall of the latter’s economy into a second recession in two years stunted output. South Africa’s economic meltdown can be traced to challenges triggered by power cuts from its coal-powered plants.
Also, the country struggled with low coal prices partly caused by growing pressures from investors and climate activists on banks to stop funding projects that are not climate-friendly. These factors that may have contributed to Nigeria topping the charts, however, the Nigerian government worked hard to earn this spot.
Nigeria’s increased oil output and aggressive Central Bank (CBN) policies in 2019 paved the way for the monumental feat.
The CBN implemented certain monetary policies last year that triggered the exponential growth which landed its economy where it is now. The CBN issued the Open Market Operation (OMO) bills to financial institutions that were used to regulate the money market.
The apex bank additionally implemented its forex injection rounds into the exchange market to support the Naira against the U.S Dollar. This eventually led to a depreciation of the Dollar against the Naira. In the long run, the Nigerian currency has seen some stability in the exchange market.
Also, the CBN was aggressive with its lending policies by mandating commercial banks to give out 60 percent of their deposit as loans to the private sector under the revised Loan-to-Deposit Ratio (LDR) with a September 30 deadline. It went further, in October, to increase the LDR to 65 percent on the back of the success recorded by the initial directive.
According to the Director of Banking and Supervision, Bello Hassan these were “Regulatory measures to improve lending to the real sector of the Nigerian economy.”
In 2019, commercial banks like Fidelity Bank Plc, Access Bank Plc, Sterling Bank Plc, FCMB Group Plc, and Wema Bank Plc, aggressively pursued loan creation and overshot their expected target under the new policy by ₦1.33 trillion, after giving out about ₦5.5 trillion from the ₦7.0 trillion deposits they recorded during the period.
The West African country took tenacious economic steps last year that defied the International Monetary Fund’s (IMF) 2019 forecast for the last quarter, recording the highest quarterly growth since the 2016 recession. Meanwhile, GDP value reached $476 billion or $402 billion depending on the exchange rate applied.
According to a report, Nigeria’s economy will continue to have a steady growth compared to that of South Africa. While the IMF cut its forecast for Nigeria’s 2020 growth to 2 percent from 2.5 percent last month, because of lower oil prices, South Africa’s GDP is forecast to expand only 0.8 percent.