On 06 April 2014, Nigeria supplanted South Africa as the largest economy in Africa. This occurred after a rebasing calculation increased Nigeria’s Gross Domestic Product (GDP) to an estimated $509bn for 2013. The data also affirmed that the economy had grown to $453bn in 2012, surpassing the previous estimate of $264bn by some margin; in comparison, South Africa's economy was measured at $384bn in 2012.^[1] The revision of GDP data is conducted periodically to reflect changes in output, and Nigeria had last done this in 1990. Sectors which were previously non-existent (mobile phones) or in infancy (e-commerce, film) now contribute approximately 1.4 per cent of GDP and these changes had to be recognised and counted.^[2]

While most commentators do not dispute the assertion that Nigeria has a larger GDP than South Africa, this does not diminish the relative strength of the South African economy. Currently, South Africa’s GDP per capita ($7508) is substantially greater than Nigeria’s ($2688).^[3] Moreover, the Johannesburg Stock Exchange (JSE) has a total market capitalisation of $903bn, compared with the Nigerian Stock Exchange’s total market capitalisation of only $81bn.5 South Africa has 60 ATMs per 100000 adults compared to only 11 in Nigeria and South Africa’s transport infrastructure is unmatched across the continent. The South African economy is also more diversified than Nigeria, which depends on oil for most of its exports and close to 80% of government revenue.^[4]

These economic indicators are mirrored across South African and Nigerian societies. In 2010, 68% of the Nigerian population were living on less than $1.25 (PPP) whilst in South Africa, just 13.8% of the population were below this threshold.^[5] In 2012, the infant mortality rate (per 1000 live births) was 78 in Nigeria compared to 33 in South Africa. Transparency International ranked South Africa 72 and Nigeria 144 in its Corruption Perception Index for 2013.^[6]

Yet despite these shortcomings, the Nigerian economy has delivered an average annual growth of 6.8% per annum from 2005 to 2013.^[7] Somehow, the country has been able to overcome these challenges and deliver rampant economic growth. This has not gone unnoticed by foreign investors, including those from South Africa. In 2011 and 2012, Nigeria was the largest recipient of foreign direct investment (FDI) in Africa,^[8] although South Africa received marginally more FDI in 2013 ($6.4bn) than Nigeria ($6.3bn).^[9]

The growing strength of the Nigerian economy will likely have geo-political ramifications. Currently, certain organisations (e.g. the G20) have just one African representative, and until now South Africa’s claim as the dominant economy in Africa has been uncontested. Looking forward, Nigeria may have a legitimate claim to be part of the G20 and usurp South Africa as the continent’s representative in such bodies. Already, Jim O’Neill, global chairman of Goldman Sachs Asset Management, who coined the term ‘BRIC’, argues that "countries such as Nigeria carry more power now…and have the right scale and population size to represent Africa”. ^[10]

South African policy-makers should not be complacent. Since 1994, the country has readily assumed its position as the anointed representative of Africa in various global fora. The fact that Nigeria is now bigger than South Africa (in GDP terms) might not be enough for it to usurp our role. But if current growth trajectories continue, which they are likely to do, then it will not be long before countries in Africa and elsewhere turn to Nigeria as the economic force and political voice of the continent.

Written by Megan Govender, DNA Economics

Notes:

[1] Nigeria becomes Africa's biggest economy. http://news.yahoo.com/nigeria-pips-africa-continents-biggest-economy-151835328.html

[2] Nigeria becomes Africa’s largest economy. http://www.aljazeera.com/news/africa/2014/04/nigeria-becomes-africa-largest-economy-20144618190520102.html

[3] Nigeria becomes Africa's biggest economy. http://news.yahoo.com/nigeria-pips-africa-continents-biggest-economy-151835328.html

[4] Nigeria to become Africa’s biggest economyhttp://www.bdlive.co.za/opinion/2014/01/31/nigeria-to-become-africas-biggest-economy

[5] World Bank

[6] Corruption Perceptions Index 2013. http://cpi.transparency.org/cpi2013/results/

[7] http://www.tradingeconomics.com/nigeria/gdp-growth

[8] World Investment Report -2013, World Investment Report -2012

[9] World Investment Report -2014

[10] South Africa's presence 'drags down Brics'.Mail and Guardian http://mg.co.za/article/2012-03-23-sa-presence-drags-down-brics