South Africa becomes Africa’s No. 1 economy again – Regains title from Nigeria
By Saheed Gbadebo
12 August 2016
South Africa has once again become Africa’s number one economy after losing the position to Nigeria just over two years ago. This feat became possible because the Nigerian naira has weakened to the dollar in recent months while the South African rand has been on the upward swing in relation to the same dollar especially since the beginning of 2016.
The numbers have shown clearly that even though the margin may be very close, South Africa remains ahead with an economy that is valued around $301bn while Nigeria comes in next at $296bn. This is according to the figures released by the International Monetary Fund (IMF) for the end of 2015.
In 2014, the Nigerian government under the leadership of President Goodluck Jonathan did a rebasing of the economy in order to include industries like telecoms, information technology, music, online sales, airlines, and film production that had been left out when the country last updated its economy in 1990. This is despite the fact that other countries usually rebase their economy at least every three years.
The Nigerian economy is not in good shape because of the unrest in the Niger Delta that has led to a sharp drop in the volumes of crude oil and gas outputs and the reluctance of foreign investors that has also led to drastic reduction in foreign direct investment. These have led to dwindling foreign reserves and a scarcity of dollars. The scarcity of dollars is even more worrisome because the economy is import-dependent and needs huge volumes of dollars to pay for imports.
Due to the economic challenges that Nigeria is currently facing and the poor economic outlook, investors have turned to new markets that have the liquid capital in order to get greater returns on investments. This is even more the case as the Nigerian economy is not likely to recover from its present contraction any time soon going by the prediction of the IMF that the economy will contract about 1.8 percent this year.
In contrast, the South African economy has continued to rally because investors now prefer to invest there because of the liquidity in the economy, the constant electricity and good infrastructure. The gains that the rand has recorded against the dollar in recent time also reflect the confidence that foreign investors now find in the economy of the country.
But despite the competition between the two countries regarding which one has the larger economy, the economies are on the downward trend and may be heading towards recession as indicated by the gloomy picture of prevailing economic indices. There is a compelling need for the authorities in the two countries to face the daunting challenges ahead of them and they must do everything possible to steer their economies away from the troubled waters of recession.