Nigeria’s GDP was rebased from about $270 billion to $510 billion in 2013. The increase of about 90 percent was attributed to new sectors of the economy such as telecommunications, movies and retail, which were not captured or underreported, previously. As a result of the rebasing, Nigeria became the largest economy in Africa and the 26th largest in the world. However, a re-calculation based on IMF data, taking into account the current exchange rates, puts South Africa back on top as the Rand has strengthened against the Dollar. But, look behind the league table and the light-hearted contest for the ‘crown’ of the largest economy in Africa, and things become a little bleaker, economically.
Nigeria’s currency has fallen sharply since the currency peg of 197 Naira to the Dollar was dropped. The currency has lost over a third of its value since the peg was abandoned, while the South African Rand has gained more than 16 percent against the Dollar since the start of the year. The appreciation of the Rand has elevated South Africa’s GDP to $301bn above Nigeria’s, which currently sits at $296bn. Since the Nigerian economy was rebased in 2013, the West African country’s GDP has been head and shoulders above South Africa until now. Nigeria is unlikely to unseat South Africa, in the long run, as the momentum that took it there has certainly waned.
Similar to the rebasing exercise undertaken by Nigeria in 2013, this revelation does not change the realities on the ground. Both Nigeria and South Africa contracted in the first quarter of the year and another contraction will push them into recession. South Africa recorded negative growth of -1.2 percent in the first quarter of the year and Nigeria’s economy similarly shrank by 0.36 percent. In Nigeria, the citizens are battling with run away inflation at 16.5 percent, which has meant that the prices of staple food items have soared, while the value of their earnings has diminished. The country is faced with pertinent economic and social challenges as unemployment has risen every quarter since the start of 2015 and its oil pipelines are vandalised incessantly. Also, Nigeria, still almost entirely dependent on its oil exports, is struggling to recover from the slump in crude oil prices. In South Africa, unemployment has soared to 26.7 percent, an alarming rate even for a continent with the highest rate of unemployment globally. Although more economically diverse, South Africa’s economy is unlikely to achieve growth above 1 percent this year and many, including the country’s Reserve Bank, are forecasting it at zero.
While these countries are slugging it out in a two-horse race, the shine of this statistic is dimmed when the realities on the ground are taken into account. This ranking, at least in the short term, will be influenced more by exchange rate movements than economic growth outlook. The statistics, and possibly the ranking, are expected to oscillate further over the course of the year but the tangible reality remains the same.