In the coming weeks, some statisticians in Abuja
could shake up Africa’s economic and diplomatic
hierarchy. The boffins look set to chart the rise of
Nigeria’s economy to become Africa’s biggest by the
end of next year. At the same time, this would
confirm the relative economic decline of South Africa
and more recently, of Egypt. Nigeria, with a
population of 170 million compared to South Africa’s
50 million, has been growing at about 7% over the
past decade, compared to SA’s average growth rate
of around 3.4%.
All the usual scepticism about the composition of
statistics is necessary, although the quality of data
collection in Nigeria has improved significantly over
the past five years. The rise of Nigeria to the position
of Africa’s biggest economy, coupled with its long
established position as the most populous African
state, will have diplomatic and strategic
implications. It also points to a new pattern in
economic growth and trade relations within the
continent. Nigeria’s economic expansion reflects a
wider growth trend in the middle of Africa.
Historically, the best economic performers were
either in North Africa or South Africa itself. Now
those economies are seeking to boost their trade
with the rest of Africa, which includes its fastest
growing economies.
These trends are confirmed by the statistical
rebasing exercise which Nigeria’s National Bureau
of Statistics is carrying out with technical assistance
from the International Monetary Fund and World
Bank. That means a recalculation of the sources –
such as agriculture, services and information
technology – of the country’s economic growth. The
statisticians’ report is likely to show a massive
upward adjustment in gross domestic product
similar to that of Ghana in 2010 which increased
the size of its economy by 60%. The centre of the
exercise in Nigeria is the rebasing of GDP based on
output and consumption patterns being updated
from 1990. Two decades ago, the booming service
sector, such as mobile telecommunications, the
‘Nollywood’ film industry, financial services and
retail, were either far smaller or did not exist.
Nigeria expects to release new figures early next
year and early estimates point to at least a 40% rise.
This would increase Nigerian GDP in 2013 – US$270
billion in 2012, according to the IMF – to $400 bn.,
against projected total South African GDP this year
of $392 bn. These raw numbers do not detract from
the depth and sophistication of South Africa’s
financial markets, infrastructure, institutional
strength and corporate governance, versus Nigeria’s
oil- dominated economy but they do underline that it
is losing relative strength.
Jolting the markets
The revised growth figures may also jolt the
markets. Nigeria’s launch this year of a $9.3 bn. oil
refinery and petrochemical plant financed by local
and international banks serves as an important
pointer to the future direction of African economies.
For the rest of Africa, it’s not a life-changing
development. South Africa and Nigeria will continue
to account for about half of all Sub-Saharan Africa’s
economy activity. For Nigeria, a larger economy
means higher per capita GDP – $2,178, compared to
$1,556 in 2012 – but still well below South Africa’s $
7,404. It also means lower tax revenue relative to
size of GDP. For South Africa, the figures represent
a symbolic loss, although it would play the part of
Africa’s United States (with a far higher per capita
income and more sophisticated economy) to Nigeria
as Africa’s China (which is due to become the
world’s biggest economy within a decade).
Regardless of the pecking order at the top, intra-
regional trade and financial links have grown rapidly
in recent years, but the regional economic
communities are a long way from achieving
integration among their member countries or with
each other. The economic as well as political
balkanisation of Africa has been a tremendous brake
on progress.
South Africa still shapes the structure of trade
within Africa. For at least twelve African countries,
exports to South Africa represent more than 1% of
their GDP. Meanwhile, frustrated by slow growth at
home, South African companies are investing in and
stepping up trade with the rest of Africa. Growing
financial links facilitate this: both South African (still
easily the market leaders) and Nigerian banks are
expanding their operations throughout Africa. In
2003, there were three Nigerian banking
subsidiaries in the rest of Africa. Now there are 44 in
33 countries. South Africa’s Standard Bank, with its
Chinese partner, is one of the leading African
institutions.
There are budgetary consequences from these
cross-border ties. South Africa and its neighbours
are in the Southern Africa Customs Union: half of the
customs revenue within the SACU zone goes to the
neighbouring states. That makes their fiscal fortunes
dependent on the health of South Africa’s trade
sector. Similarly, Nigeria’s trade with the rest of
West Africa is of growing importance. In the regional
grain markets, a 3% increase in Nigerian inflation
could spark a 1% increase in inflation in its regional
trading partners.
www.africa-confidential.com/article/id/5118/Economic_giants_change_places