It’s been coming for a while – South Africa being booted as Africa’s biggest economy. In fact, many economists will say they’ve known for longer than a decade that Nigeria was pumping out the most gross domestic product (GDP) on the continent – it just wasn’t reflecting on paper, until now.
In April this year, Nigeria announced that its nominal GDP for 2013 was sitting at $510 billion; not just showing up former No. 1 South Africa’s own nominal GDP of $350 billion, measured annually by Statistics South Africa, but almost eclipsing it entirely.
So what happened? Did Nigerians wake up with heavier pockets one morning? How did Africa’s new economic kingpin add 89% to its GDP overnight?
Step aside, South Africa! Nigeria is now Africa’s new economic powerhouse – but what does that really mean?
The leap is due to Nigeria ‘rebasing’ its GDP data. What this means is that the country’s National Bureau of Statistics relooked how it compiled its gross domestic product figure, and (finally) included the income being generated by the telecommunications, information technology, movie production and online commerce industries.
Why is Nigeria only now including these industries in its GDP data? After all – the country is famously home to ‘Nollywood’, is saturated with mobile phones (over 100 million cellphones!), and is seeing some thrilling action on the tech start-up scene.
It is common practice for countries to rebase their GDP every three years, to take into account changes in their economy, like emerging industries. Nigeria just hadn’t done it for 20 years.
Breaking it down
There are two things that you need to understand about Nigeria’s new economic status: 1) it doesn’t mean that the average guy on the streets of Lagos earns more and has a better quality of life than his South African counterpart, and 2) that being said, Mzansi has become far too complacent; her year-on-year GDP growth figures are dismal.
Let’s start with WHY Nigeria’s citizens are still poorer, despite her enormous economy. It’s simple: there are almost 170 million people living in the West African country, while there are only just over 51 million in South Africa, at the last census. More people equals more GDP.
This is why – to get a true snapshot of the prosperity of a country – a better measurement to use is GDP per capita, which means the amount of money that the country produces per citizen. South Africa’s GDP per capita is almost five times higher than Nigeria’s, meaning the average South Africa earns almost five times more. (The Economist reports that the majority of Nigerians live on less than $1.25 a day.)
Life expectancy is also a good indicator of quality of life: the average South African is looking at 56 years, and the average Nigerian is looking at 52 years.
Taking GDP per capita and life expectancy into account, it would seem that South Africa is still coming out tops, despite losing out to her West African counterpart this year in the race to be the continent’s biggest economy. But these aren’t the only numbers that matter.
No more sitting pretty
What really matters to an economy is consistent growth – at least enough growth to cater for the growing needs of its citizens, but ideally, over and above that, the kind of growth that makes it attract global investment.
After Nigeria posted those spectacular numbers in April, it put its nominal GDP growth rate for 2013 at 7.41%. However in July, this was revised down to an actual growth rate of 5.49% for 2013, and a 2012 growth rate at 4.21%.
For South Africans suffering under the weight of inflation, and increasing fuel and food costs, Nigeria’s economic growth rates taunt us with their incredible gains.
South Africa’s GDP growth rate for 2013: a mere 1.9%. Every year our Rands are buying us less, while the future for our Nigerian counterparts looks brighter by the minute, even if improved access to basic services and upgrades to infrastructure are not happening fast enough for Africa’s new kingpins.
Despite factoring money generated by new sectors into Nigeria’s booming economy, oil remains its biggest industry, and this is unstable. South Africa has a far more mature, balanced and less volatile economy, but it is stagnating.
Statistics and percentages aside, the big picture is this: with such a massive population, it is to be expected that Nigeria’s GDP is the biggest on the continent – what is truly amazing is the rate at which Nigeria’s economy is growing.
South Africa needs to pull up her economy’s socks if she wants to remain relevant and competitive on the global arena.