Nigeria has overtaken South Africa as the largest economy in Africa after a recent rebasing calculation nearly doubled its gross domestic product.
This means that the Nigerian GDP has been recalculated to better reflect the current levels of output. The result of the rebasing makes Nigeria’s economy about 30% bigger than South Africa’s with Nigerian GDP is at $509 billion with the South African economy at $322 billion. The high jump is due to the inclusion of sectors such as telecoms, ecommerce and the “Nollywood” film industry which did not exist when the calculations were last done in 1990.
While this rebasing gives some interesting insight into the sheer scale of Nigeria’s economy it still has a way to go to reach South Africa’s levels of economic maturity.
This can be seen when you compare the two countries in terms of:
1.Primary, Secondary, and Tertiary Economic Activities
While both economies rely heavily on commodity exports they do so to different degrees. Nigeria receives more than 95% of its foreign income from oil exports. In South Africa on the other hand only 65% of total exports are commodities and they are diversified over several different commodities.
South Africa therefore generates much more through manufacturing and the service industries. Although Nigeria does have growth in these areas, mainly due to the large population driving a need for goods and services it is not nearly as mature as South Africa’s.
South Africa definitely sets the benchmark in Africa in terms of banking regulation and supervision in the financial services. While Nigeria has seen many legislative improvements in their banking sector recently, it is still very much as cash based economy and less than 35% of Nigerians have a formal bank account. In South Africa it is closer to 70%.
Nigeria is Africa’s largest mobile market with more than 125 million subscribers and a market penetration of around 75%. The rapid growth has however led to problems with network congestion and quality of service. In South Africa while subscriber numbers are not as high due to SA’s smaller population there is a market penetration of over 100%. Mobile broadband services also rival available DSL fixed-line offerings in terms of both speed and price, and have consequently outpaced them in terms of subscriber numbers.
As mentioned above the two countries differ greatly in terms of population size. South Africa is home to around 52 million people, while Nigeria has a population of over 170 million. On the one hand this means that while Nigeria’s GDP is now higher, its GDP per capita is still well below that of South Africa. On the other hand it means that Nigeria has a very large number of people which can be seen as both a potential workforce and a potential customer base, making Nigeria an attractive proposition for investment.
While Nigeria’s repositioning as Africa’s biggest economy is not really a threat to South Africa it does tell a new story. It shows that there is a new reality taking shape in Africa, while South Africa was historically always the ‘go-to’ country for investment into Africa, other regions are increasingly asserting their economic voice and becoming viable options.