Nigeria has overtaken South Africa as the continent’s largest economy, a report by Bloomberg has shown.
Nigeria’s re-emergence as Africa’s biggest economy followed South Africa’s slump into its second recession in two years, as severe rolling power blackouts frustrate President Cyril Ramaphosa’s attempt to revive growth.
The ruling All Progressives Congress (APC) welcomed Nigeria’s new dominant economic status, which it attributed to the policies of President Muhammadu Buhari-led administration to stimulate growth.
The South African economy contracted 1.4 per cent in the fourth quarter of 2019, according to official statistics released on Tuesday, far outpacing analysts’ forecast of a 0.2 per cent decline.
The latest gross domestic product (GDP) figures, released by Stats SA, showed that the economy contracted by 1.4 per cent in the fourth quarter of 2019, which followed a contraction of 0.8 per cent in the third quarter of last year.
In addition to the shrinking economy, seven out of 10 industries in South Africa contracted in the fourth quarter as well. Only finance, mining and personal services grew, but not enough to prevent the country from falling into an inevitable recession.
The main sectors that hindered economic growth included the transport and the communications industry, which shrunk by 7.2 per cent and contributed to the 1.4 per cent fall in GDP.
The largest sector to contribute to South Africa’s recession was construction, which has declined for six consecutive quarters. However, agriculture also proved to be the economy’s main drag in 2019.
“The manufacturing industry dipped by 1.8 per cent and agriculture fell by 7.6 per cent, owed to late rains and heat waves. The electricity, gas and water supply industry also boomed in the fourth quarter. Mining experienced a slight growth of 1.8 per cent, which contributed just 0.1 of a percentage point to economic growth in the fourth quarter.
“The finance industry grew by 2.7 per cent, contributing 0.6 of a percentage point to South Africa’s overall growth,” a statement by South Africa’s statistics agency stated.
According to the Financial Times, the contraction came after a 0.8 per cent drop in economic output during the previous quarter, leading to South Africa’s second recession — defined as two quarters of negative growth — since 2018.
Owing to this, Bloomberg, in a report, noted that “to the question of whether South Africa or Nigeria, the two countries that account for almost half of sub-Saharan Africa’s gross domestic product, is the biggest economy on the continent has long depended on which exchange rate you use for the West African nation.
“But now 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 economic growth beat forecasts in the fourth quarter, helping its economy to expand the most in four years in 2019 as oil output increased and the central bank took steps to boost credit growth.
“GDP in the West African country stood at $476 billion or $402 billion, depending on the rate used. South Africa’s economy went in the opposite direction.”
On the other hand, for South Africa, its 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 U.S. Federal Reserve’s emergency rate cut Tuesday amid risks from the spread of the Coronavirus.
“Projections show Nigeria’s economy will continue to grow faster than South Africa’s. While the International Monetary Fund cut its forecast for Nigeria’s 2020 growth to two per cent, from 2.5 per cent last month, due to lower oil prices, South Africa’s GDP is forecast to expand only 0.8 per cent,” the report said.
Meanwhile, the APC has hailed the economic policies of the Buhari-led administration following the re-emergence of Nigeria as Africa’s biggest economy.
The National Publicity Secretary of the party, Mallam Lanre Issa-Onilu, in a statement yesterday, said since the Nigerian economy exited recession in 2017, the country’s economic growth has not been a fluke but a result of deliberate practices and policies of the Buhari administration.
This, he said, has increased transparency in governance, diversification of the economy away from oil, improved fiscal management and a healthy protectionist approach which has aided the growth and increased the capacity of domestic producers and in turn, created jobs.
“This is not a small feat and should be celebrated by all. The All Progressives Congress (APC) congratulates the president, the APC family and indeed all Nigerians. Those expecting the worst and wishing the country ill-fortune should now give up. The task of developing a nation is a collective one. Politics should not drive Nigeria apart; it should unite us when the interest of our nation is involved.
“Of course, there are still a lot of challenges on the way. The journey is not going to be a walk in the park. That is not unusual, considering the level of decay our nation has sunk into under the watch of the Peoples Democratic Party (PDP) and the current efforts of the PDP leaders to slow down our progress as a nation. However, this government, under the capable hand of President Buhari, is single-minded and courageous enough to lead our country to the promised land,” the party added.
According to APC, the hugely successful anti-corruption efforts such as the implementation of a Treasury Single Account (TSA) that allows the government to better track and manage its resources and a more transparent government payroll and personnel system that eliminated duplication and “ghost workers” have alleviated poverty and made more cash available for critical infrastructure projects.