Nigeria has overtaken South Africa as the continent’s largest economy, a report by Bloomberg has shown.
This followed South Africa’s slump into its second recession in two years, as severe rolling power blackouts frustrate President Cyril Ramaphosa’s attempt to revive growth.
The economy contracted 1.4 per cent in the fourth quarter of 2019, according to official statistics released on Tuesday, far outpacing analyst forecasts of a 0.2 per cent decline.
According to the Financial Times, the contraction came after a 0.8 per cent drop in economic output during the previous quarter, leading to South Africa’s second recession — defined as two quarters of negative growth — since 2018.
Owing to this, Bloomberg, in a report, noted that, “to the question of whether South Africa or Nigeria, the two countries that account for almost half of sub-Saharan Africa’s gross domestic product, is the biggest economy on the continent has long depended on which exchange rate you use for the West African nation.
“But now both the official naira rate of N306 per dollar and the weaker market exchange rate of around N360 that almost all investors use put Nigeria on top.
“Nigeria’s economic growth beat forecasts in the fourth quarter, helping its economy to expand the most in four years in 2019 as oil output increased and the central bank took steps to boost credit growth.
“GDP in the West African country stood at $476 billion or $402 billion, depending on the rate used. South Africa’s economy went in the opposite direction.”
On the other hand, for South Africa, its full year expansion was 0.2 per cent, the least since the global financial crisis, and even less than the central bank and government estimated. Based on an average rand-dollar exchange rate of 14.43 for the year, GDP was $352 billion.
“South Africa’s weak growth adds to pressure on the central bank to lower the benchmark interest rate at its Monetary Policy Committee meeting March 19, especially after the U.S. Federal Reserve’s emergency rate cut Tuesday amid risks from the spread of the coronavirus.
“Projections show Nigeria’s economy will continue to grow faster than South Africa’s. While the International Monetary Fund cut its forecast for Nigeria’s 2020 growth to two per cent from 2.5 per cent last month, due to lower oil prices, South Africa’s GDP is forecast to expand only 0.8 per cent,” the report.