Nigeria is set to overtake South Africa as Africa’s largest economy according to a soon-to-be-released National Bureau of Statistics (NBS) rebased Gross Domestic Product (GDP).
This is according to emerging markets focused investment banking firm Renaissance Capital, whose team of analysts were in Abuja, over the weekend.
This means Nigeria, at $405Bn in 2013 would be the largest economy in Africa, ahead of South Africa at around $370 bn.
Other impacts of the rebasing include the possible reduction of growth rates to 5 – 6% from 6 – 7%, and an increase in GDP per capita to $2,400 from around $1,700, in essence moving Nigeria into middle income economy territory.
According to an expert analyst, sectors that may show the biggest upward revision range from Nollywood to IT and telecoms, while agriculture will shrink from around 40% of GDP to 25 – 30% of GDP.
The rebasing will show public debt shrinking to 13% of GDP from 20% of GDP. Public external debt would be below 2% of GDP, while the current account surplus may still be 5% of GDP which will leave the sovereign in a good position to borrow if needed.
The NBS is seeking to change the calculations of Nigeria’s GDP, using a new base year of 2010 to give a better indication of the size and composition of its economy.
Most governments overhaul GDP calculations every few years to reflect changes in output and consumption, such as telecoms, financial services and internet usage, but Nigeria has not done so since 1990 (about 23 years) suggesting that the previous GDP framework underestimated economic activity.
The numbers will have new implications for investors and the geopolitics of Nigeria’s place in Africa.
Nigeria already hosts the second largest debt and stock markets in Africa, behind South Africa.
Its stock market is valued at $77 billion, while the secondary market bond trading volumes, ”certainly exceed those of Egypt and Morocco and represent around 20% of South Africa’s turnover,” according to Samir Gadio, an emerging markets strategist, at Standard Bank, in London.
Overall – Nigeria’s debt, budget and current account ratios will look among the best in Africa and in the emerging markets (EM), once the rebased figures are released, notes Robertson.
