Nigeria Loses Africa’s Biggest Economy Position To South Africa

South Africa’s economy regained the position of
Africa’s largest in dollar terms more than two
years after losing it to Nigeria as the value of the
nations’ currencies moved in opposite directions.
Based on gross domestic product at the end of
2015 published by the International Monetary
Fund, the size of South Africa’s economy is $301
billion at the rand’s current exchange rate, while
Nigeria’s GDP is $296 billion.
That’s after the rand gained more than 16
percent against the dollar since the start of 2016,
and Nigeria’s naira lost more than a third of its
value after the central bank bank removed a
currency peg in June.
Both nations face the risk of a recession after
contracting in the first quarter of the year.
The Nigerian economy shrank by 0.4 percent in
the three months through March from a year
earlier amid low oil prices and output and
shortage of foreign currency.
That curbed imports, including fuel. In South
Africa, GDP contracted by 0.2 percent from a year
earlier as farming and mining output declined.
Alan Cameron, an economist at Exotix Partners
LLP, said: “More than the growth outlook, in the
short term the ranking of these economies is
likely to be determined by exchange rate
movements.”
Although, Nigeria is unlikely to be unseated as
Africa’s largest economy in the long run, “the
momentum that took it there in the first place is
now long gone.”
The South African rand rallied as investors turned
to emerging markets with liquid capital markets
to seek returns after Britain voted to leave the
European Union on June 23, even as the central
bank forecast the economy won’t expand this
year and the nation risks losing its investment-
grade credit rating.
The ruling African National Congress’s lowest
support since 1994 in the Aug. 3 local government
vote led to further gains on speculation that it
will pressure the party to introduce economic
reforms that will boost growth and cut
unemployment.
In Nigeria, investors didn’t flock to buy naira-
based assets after authorities removed the peg of
197-199 naira per dollar.
The Central Bank of Nigeria raised its benchmark
interest rate to a record in July to lure foreign
money, even as the IMF forecast the economy will
contract 1.8 percent this year.
Nigeria was assessed as the continent’s largest
economy in April 2014 when authorities in the
West African nation overhauled their GDP data for
the first time in two decades.
The recalculation saw the Nigerian economy in
2013 expand by three-quarters to an estimated 80
trillion naira.
The rand weakened 0.4 percent to 13.3323 per
dollar at 7:56 a.m. in Johannesburg on Thursday,
ending three days of gains.
The naira dropped 0.4 percent to 321.50 per
dollar, heading for a record low on a closing basis.