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Here’s Why Nigeria Remains Africa’s Largest Economy

Nigeria’s GDP rebasing estimates in 2014 indicated that Nigeria’s nominal GDP was much higher than previously estimated. From its $360 billion in 2010 and $455 billion in 2012 to $510 billion in 2014, Nigeria’s GDP became the largest in Africa and the 26th in the world. The good news was that the said growth rate in GDP was driven by the services sector of the economy, which contributed 51 percent of the GDP. Not only did Nigeria’s GDP 2014 hit $510 billion. By growing to $550 billion in GDP in 2015, Nigeria further widened the gap between it and South Africa.

Since that announcement was made, South Africa took it as a challenge and has since then done everything possible to overtake Nigeria. From MTN to Shoprite, everything effort was in geared towards flooding our consumer market with South African goods. By so doing, South Africa systematically made sure it grows its exports to Nigeria while drastically avoiding Nigerian exports, mostly oil. While the figures were bandied around, most Nigerians couldn’t refuse to wonder why the so-called Africa’s largest economy when tens of millions of Nigerians are out of job!

While this use of the largest economy in Africa to further heighten rivalry between the two economic powerhouses in Africa should be downplayed by economic watchers from South Africa and Nigeria, we should still state the obvious, which is that Nigeria’s economy remains Africa’s largest economy. Not only because it is Africa’s largest consumer market. Having the largest concentration of Africa’s best entrepreneurs makes it equally Africa’s potential investors’ best destination and as a result Africa’s indisputable future industrial hub.

No doubt South Africa has best infrastructure and more industrialize than Nigeria and as a result of its years of social investments, has its GDP more qualitative than Nigeria’s; Nigeria’s largest consumer market status in Africa still gives Nigeria’s quantitative GDP the status of the largest in Africa.

Nigeria’s nominal Gross Domestic Product, GDP, now stands at $509.9 billion, making the nation’s economy the largest in Africa and the 26th in the world, according to the preliminary results of the rebasing exercise of the federal government. But that as published by the International Monetary Fund (IMF) in late 2015 that the size of South Africa’s GDP has become $301 billion, while Nigeria’s now $296 billion.

Then, if going by the figures, it is true that Nigeria’s economy shrank by 0.4%, while South Africa’s contracted by 0.2%, certainly, it is absolutely impossible for Nigeria’s GDP to have so shrunk from its $550bn in late 2014 to $296 billion by the end of 2015—losing $254 billion, while South Africa’s GDP dropped from about $390 billion in late 2014 to $301 billion—losing only $90 billion. Even if that argument could be allowed to hold, however, the fact that the difference the GDP of the two countries was just $5 billion ($301—$296 billion), when margin of error is considered, it is certain that it would have difficulty for that to be enough justification to insist that South Africa’s economy has now overtaken Nigeria’s.

Is it not only hypocritical for the same IMF that resisted Nigeria’s borrowing to upgrade its infrastructure like most modern economies, given that our debt-to-GDP ratio, which at about 12% is by far the lowest among our peers? Why the new GDP announcement is politically motivated as a result lacks credibility is the fact that in their GDP growth analysis, no mention was made or any form of recognition was given to the fact that South Africa with debt-to-GDP ratio of about 44% is more indebt than Nigeria and should Nigeria has such high national debt, and should the growth in debt be added to growth in GDP, no doubt, Nigeria’s GDP would have remained higher than South Africa’s to remain largest in Africa.

Certainly those who made this announcement are mischievous to the extent that they simply wanted to blackmail this administration by using the announcement to falsely make Nigerians and the world believe that the Jonathan administration was better in managing the economy than the present government. But the truth needs to be told here, which is that the level of fraud witnessed during the immediate last government was so huge that those who have assigned to themselves to power to churn out these so-called GPD figures do so rather than on the basis of reliable facts are doing so on basis of highest bidder.

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Is it not the IMF which insisted that notwithstanding Nigeria’s $350 billion infrastructure deficit, argued that it was okay for the country to remain among the league of nations like Algeria’s 8%, Kuwait’s 7%, Afghanistan’s 6.60%, Libya’s 6.10%, Saudi Arabia’s 1.60%, etc. that have one of the world’s lowest debt-to-GDP ratios? Of course, the IMF advisers are fully aware that there is no way Nigeria should expect to sustain its economic growth without diversifying by becoming an industrial economy and should never ever achieve that with its kind of third-world infrastructure.

However, without investing in strategic infrastructure, how could countries like Nigeria be able to address their huge infrastructure deficits, or be expected to become as competitive as developed countries by reducing the current high cost of doing business? Without economic diversification and infrastructure borrowing, how else do we intend to begin to narrow the present gap that has kept it the world’s number one dumping ground for foreign made goods, goods we should ordinarily be making ourselves?

The irony of this announcement is that it is the same people who announcement that Nigeria’s GDP’s was led by non-oil sectors, are now announcing that the GDP has shrunk from about $550 billion to $296 billion, almost 50%. The same way the rolled out the figure showing the country’s GDP overtaking South Africa without some measurable government-led actions such as investments in the country’s infrastructure expansion and modernization, number of jobs created and number of Nigerians lifted out of poverty to justify how they came up with the largest economy status they handed Nigeria.

If it was non-oil sectors that drove the so-called GDP growth that led to Nigeria overtaking South Africa in GDP, what has suddenly happened to the non-oil sector? Why is that it is as a result of the oil economy plugging, that has brought this almost 50% fall in the country’s GDP?

Even if it was all about quantitative GDP growth, without possible trickledown effect, at least the so-called non-oil sectors used in justifying the growth rate they were parading. From this, it is certain that in their efforts to further push the Buhari government to fully romancing with the IMF economic policies, they are carefully sending out false alarm that Nigeria’s economy is not just approaching danger zone but rather is already the danger zone.

And that the Central Bank of Nigeria fights inflation blindly by both raising the cost of funds tightening system liquidity without preoccupying itself with how much damage such pro-recessionary monetary policy does to the real sector, growth and jobs makes one to wonder what exactly is the basis for such policy stance. If not being narrowly conducted in the interests of banks and trying to please friends at the IMF, what else should the managers of our monetary policy say is their reason for thinking that they can solve the inflationary problem of the economy by taking measures that further increase the inflation?

Obviously, at this critical stage of our economic development, one should have expected the CBN to abandon its current pro-recessionary monetary policy if not for any reason at least for the very fact that such entrenched tight monetary policy regime has neither short-term nor long-term benefits to the Buhari administration’s economic diversification agenda.

The truth is that the same way most Nigerians were sceptical in April 2014 when the announcement was made that Nigeria’s had overtaken South Africa’s in GDP, most Nigerians are today indifferent when they heard that South Africa’s economy has now retaken its status as Africa’s largest economy. In fact, for these Nigerians care less insisting that whether first or second, these politically motivated announcements have never translated into more money in their bank accounts or more food on their table.

In fact, if you ask most Nigerians what would they prefer, they will insisting at least having Nigeria amongst the least in these politically motivated GDP figures at least if that would return international aid donors, who since announcing Nigeria’s economy as Africa’s largest, have drastically withdrawn some of their social interventions beneficial to most vulnerable Nigerians.

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Written by How Africa

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