Two years after Nigeria rebased its economy and overtook South Africa as the continent’s top economy, South Africa has bypassed Nigeria based on recalculated exchange rates to reclaim bragging rights as Africa’s No. 1 economy.
Current exchange rates put South Africa ahead because the rand has strengthened against the dollar, while Nigeria’s currency fell sharply after its peg to the dollar was dropped, BBC reported.
Not that either country is doing so well. Both economies could be on the brink of recession.
South Africa’s gross domestic product is $301 billion at the rand’s current exchange rate, while Nigeria’s GDP is $296 billion, based on International Monetary Fund data at the end of 2015, Bloomberg reported. 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.
Both countries face the risk of a recession after their economies contracted in the first quarter of 2016.
South Africa’s GDP shrank by 0.2 percent in the first quarter from a year ago as mining and agricultural output declined.
The Nigerian economy shrank by 0.4 percent in the three months through March compared to a year earlier thanks to a shortage of foreign currency and low oil prices that curbed imports, including fuel.
In the long run, Nigeria will likely keep the title as Africa’s largest economy, but “the momentum that took it there in the first place is now long gone,” said Alan Cameron, an economist at Exotix Partners LLP, in a Bloomberg interview.
“In the short term, the ranking of these economies is likely to be determined by exchange rate movements,” — not growth, Cameron said.
Nigeria rebased its economy in 2014 to include industries previously uncounted including telecoms, information technology, music, online sales, airlines, and film production, BBC reported.
Most countries rebase and update measurements of the economy every three years or so. Nigeria had not updated its GDP base year since 1990.
South Africa’s economy is more diverse, while Nigeria depends almost completely on oil exports. As the price of oil continues to stay low, the flow of revenue from oil continues to lag.
South African economic growth in 2016 is unlikely to exceed 1 percent and the reserve bank forecasts zero growth with high unemployment and a credit rating review expected at the end of the year.