The IMF’s latest World Economic Outlook report for 2014 shows that, while South Africa’s economy is projected to grow over 2% for the next couple of years, Nigeria is expected to continue its economic domination on the continent, with growth over 7%.
This follows hot on the heels of the re-basing of Nigeria’s GDP, which saw the West African country overtake South Africa as the continent’s biggest economy.
The new calculations for Nigeria take into account changes in production and consumption since the last time the exercise was carried out in 1990, including an added focus on communications and the movie industry.
The data indicated that the economy grew to $453 billion in 2012, instead of $264 billion as measured by the World Bank for that year.
South Africa’s economy was at $384 billion in 2012, according to the World Bank.
Despite Nigeria’s new position as Africa’s leading economy, however, many economists and analysts point out that the country’s GDP per capita – which is the most important measure of the economy – sits at $2,688, still far behind South Africa’s $7,508.
Nigeria has a population of over 170 million people – more than triple South Africa’s population of 51.2 million.
Numbers: Going for growth
The IMF’s latest World Economic Outlook report for 2014 paints a contrasting picture for Africa’s top two nations, showing that Nigeria’s projected economic growth for next two years will continue above 7%, while South Africa will maintain its struggle to keep above 2%
In 2013, South Africa saw real GDP growth of 1.9% according to the IMF – a result far-removed from initial projections of 2.8% (which was later cut to 2.5%). In 2014, the IMF projects South Africa’s GDP will grow to 2.3%, reaching 2.7% in 2014, following the past two years of decline.
According to the IMF, Nigeria has maintained a real GDP growth rate over 6.0% every year for almost a decade, averaging 6.8%. Nigeria is projected to grow at a rate of 7.1% in 2014 and 7.0% in 2015 – settling on 6.7% by 2019.
Real GDP growth (%) for South Africa and Nigeria, 2006-2015
Economist, Mike Schussler said that the South African economy appears to be “falling asleep at the wheel,” adding that, broadly speaking, the economy has been in a slow growth or stagnating mode for about 18 months and is, at best, continuing along this path.
Factors impacting this trend include the “most damaging strike action in 20 years” – as well as consumer and producer prices rising faster than anticipated.
Unemployment also remains a constant drag in the country, with 24.7% of the working population without jobs – a percentage the IMF expects won’t change for the next 3 years.
Nigeria is not without its own problems, either.
For ordinary Nigerians — most of whom still live on less than $2 a day — the country’s new position as Africa’s top dog is likely to have little effect except to improve the country’s balance sheet and its credit rating and promote it from being a low-income economy.
The country itself still faces infrastructure challenges in terms of roads, and power infrastructure providing electricity to businesses.
Additionally, the country has earned a global reputation for political and social unrest, as well as wide-spread corruption in conducting business.
Good for Nigeria, good for Africa
According to Ernst & Young Africa Business Centre lead, Michael Lalor, Nigeria and South Africa are at very different points in their growth curves – with the latter being in a far better position.
In terms of infrastructure, financial systems, manufacturing capabilities, quality of services, retail markets and income levels – the countries are incomparable, Lalor said.
“On any kind of objective risk-versus-reward opportunity analysis of African markets, South Africa will be among the best-positioned markets for the foreseeable future,” he said.
However, there is positivity and cause for celebration for Nigeria and its new status, in the greater picture.
“Ultimately, the rebasing of Nigeria’s economy simply confirms its status as a dynamic growth market.”
“It reinforces the broader African growth story and positions Nigeria and South Africa as complementary regional economic and investment hubs for West Africa and Southern Africa respectively.”
“This is reason for celebration, rather than angst,” the business lead said.