The latest PricewaterhouseCoopers (PwC) report has revealed that Nigeria has potential to rise up the global GDP rankings, if only it can diversify its economy and improve governance standards and infrastructure.
The report also projected that the world economy could double in size by 2042, growing at an annual average real rate of around 2.5 per cent between 2017 and 2050.
According to the report, China has already overtaken the US to be largest economy based on GDP in public private partnership (PPP) terms, and could be the largest valued at market exchange rates before 2030, and that India could overtake the US by 2050 to go into second place and Indonesia could move into 4th place by 2050, overtaking advanced economies like Japan and Germany. It further said by 2050, six of the seven largest economies in the world could be emerging markets.
This growth, the report added, would be driven largely by emerging market and developing countries, with the E7 economies of Brazil, China, India, Indonesia, Mexico, Russia and Turkey growing at an annual average rate of around 3.5 per cent over the next 34 years, compared to only around 1.6 per cent for the advanced G7 nations of Canada, France, Germany, Italy, Japan, the UK and the US. “We will continue to see the shift in global economic power away from established advanced economies towards emerging economies in Asia and elsewhere. The E7 could comprise almost 50 per cent of world GDP by 2050, while the G7’s share declines to only just over 20 per cent”, said PwC Nigeria’s Chief Economist and co-author of the report, Dr. Andrew Nevin.
When looking at GDP measured at market exchange rates (MER), there is not quite such a radical shift in global economic power. But the spotlight will certainly be on the newer emerging markets as they take centre stage.
The report said Nigeria, which is one of the emerging markets from Africa, has the potential to move eight places up the GDP rankings to 14th by 2050, but it will only realise this potential if it can diversify its economy away from oil and strengthen its institutions and infrastructure.
“Growth in many emerging economies will be supported by relatively fast-growing populations, boosting domestic demand and the size of the workforce. This will need, however, to be complemented with investments in education and improvement in macroeconomic fundamentals to ensure there are sufficient jobs for the growing number of young people in these countries,” Nevin, said while analysing the report.
Focusing on the Nigerian economy, the report said the sharp drop in global market oil price, has lowered Nigeria’s initial ranking in 2015 as the fastest growing economy among countries modeled, to the sixth fastest. This reflects the slowdown of the Nigerian economy over the last two years as a result of a fall in oil prices.
The report however said Nigeria would average around 2 per cent annual growth to 2020, but maintained that to support long-term sustainable growth, Nigeria needs to develop a broader-based economy, diversifying its exports to ensure its growth is not dampened by global price or demand shocks.
The report advised Nigeria to develop its institutions and infrastructure, supporting long-term productivity growth.
The report identified five ways in which Nigeria can support inclusive growth, which include improving tax collection; economic diversification, reducing corruption; removal of business constraints and increasing labour productivity.