Decoding Nigeria as Africa’s biggest economy
The recent shrinking of the South African economy in the last quarter of 2019 has strengthened Nigeria’s position as the biggest economy in Africa. This is the case, irrespective of the exchange rate used in the comparison, whether the N306 of the official foreign exchange market or the N360 of the parallel market, hence making the greater size of the Nigerian economy on the continent incontestable.
The actual GDP figures for the fourth quarter of 2019 indicate that South Africa’s GDP, based on an average of about 14.43 rand-dollar exchange rate, stands at $352 billion while Nigeria’s GDP is either $402 billion or $476 billion, depending on which exchange rate is used in the computation. Indeed the Nigerian economy is the undisputed, largest economy in Africa.
In the same vein, official data indicate that the South African economy entered its second recession in two years quite unlike Nigeria, which has maintained a positive growth momentum since the second quarter of 2017 when it exited its five-quarter recession. While the South African economy shrank by 1.4 per cent in the fourth quarter of 2019, following a revised 0.8 per cent contraction in the third quarter, Nigeria’s GDP grew by 2.55 per cent in the fourth quarter of 2019, the greatest recording of quarterly GDP growth since it exited recession.
The recent downgrading of Nigeria’s 2020 GDP growth rate by the International Monetary Fund (IMF) for 2020 can be better understood by the downward spiral of crude oil prices, which has been the bane of the economy. This notwithstanding, the growth prospects of the Nigerian economy do not appear dim unlike that of South Africa where frequent power cuts have placed some significant obstacles to economic growth.
For many observers, this acclaimed position of Nigeria occupying the biggest economy position on the continent is not really cheery. Many have argued that in a situation where living standards in the country are deteriorating and poverty becoming widespread, what value does the ordinary man derive by the new “biggest economy’’ status the country now occupies on the continent? In addition, Nigeria has for some time now, been classified as the “poverty capital of the world”, by the World Economic Forum given that the country overtook India, the erstwhile occupant of the position. In a country where the number of out-of-school children, particularly in the northern parts of the country is growing, by leaps and bounds and insecurity growing across the length and breadth of the nation, the average Nigerian is not amused by this “biggest economy” classifications for the Nigerian economy.
In the country, the quality of life has shown significant deterioration across the country and youth unemployment has been growing. This is seen by many as a ticking time bomb. With all these, hopes of having a reasonable quality lifestyle now and in the immediate future appears farfetched.
Given these ugly manifestations, the government should not pat itself on the back with this “size of the economy” classification. Even though the South African economy appears to have entered into its second recession in recent times, it’s quality of life index still supersedes that of Nigeria. Public utilities in South Africa are still overwhelmingly functional despite the recent erratic power supply recently experienced. Structurally, the fundamentals for growth in the South African economy, such as basic infrastructure and stable political structure, among others, appear to be stronger in South Africa than in Nigeria.
In addressing this issue of enhancing living standards, the government should go back to its Economic Recovery and Growth Plan (ERGP) and work hard towards achieving its three core objectives of enhancing macroeconomic stability and diversification, investing in the people and creating jobs and finally making the economy globally competitive by investing in new technologies. While the ERGP has largely failed to achieve its set objectives, there’s the need to redesign it to enhance its value to the Nigerian people. This is necessary because the quality of life needs to be improved and jobs need to be created. There is a need to arrest the unwholesome migration of our youth and very highly skilled personnel to foreign lands. This trend of migration appears to have continued, despite the obstacles being put in the path of the restless youth. What they actually seek is an environment where they can unlock their latent and enhance their living standards.
Meanwhile, the recent COVID-19 – coronavirus pandemic has brought out clearly the vulnerability of the economy to international developments. The mere crash of the oil price globally due to low demand from China and the price cuts and excessive supply by Saudi Arabia and Russia respectively shows that indeed the IMF appears focused in downgrading the growth prospects of the economy in 2020. There appears to be no hope in sight unless the authorities focus on what really matters in the development of the economy particularly for a frontier economy such as Nigeria’s. A situation where this slight disruption in the economy leads to a skyrocketing of the parallel market exchange rate to over N410 per dollar in just two days is indeed worrisome on the huge shock effect on the economy due to these global events. The country needs to seriously consider the restructuring of the economy through the restructuring of the governance structure of the country. With a focus on restructuring and the three objectives of the ERGP, there may be the hope of not only further grow the size of the economy but also enhancing the living standards of the ordinary Nigerian.
Incredibly as it may sound, there is a sense in which the role of the Central Bank of Nigeria (CBN) in the growth process under review cannot be discounted. Although many economic analysts have been wondering why the CBN Governor, Mr. Godwin Emefiele remains the focal point when some fiscal policies that have produced positive results come into focus, it should not be surprising any more with the recent ‘CBN Governor’s Roundtable’ on the economy, which turned out to be a huge success too. The CBN has surprisingly filled a huge gap that the fiscal policy leaders in the country have curiously created. The apex bank, which has primary responsibility for monetary policies have championed some fiscal initiatives like Anchor Borrower’s programme, restriction of forex for the importation of certain items, outright ban on the importation of items that can be locally produced and some concrete steps that have encouraged food production and agri-preneurship. These are critical factors that duty bearers in Abuja should not ignore while planning strategically for Nigeria to retain its position as Africa’s biggest economy.
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