Nigeria has maintained its top
spot as Africa’s biggest economy, ahead of South Africa and Egypt — but this is
only when its gross domestic product (GDP) is calculated at N305/$1.
According to the International
Monetary Fund (IMF), Nigeria’s GDP stands at $397.47 billion at the end of
2018, while South Africa could only muster $376.68 billion as Egypt was
estimated to weigh only $249 billion.
However, Renaissance Capital, a
leading emerging and frontier markets investment bank, says South Africa is
actually Africa’s biggest economy — if Nigeria’s exchange rate realities are
factored into the calculation of the nation’s GDP.
According to RenCap, GDP
calculations using the purchasing power parity (PPP) of N362 per dollar brings
Nigeria’s GDP to $357 billion — effectively shaving about $40 billion off the
country’s GDP.
President Muhammadu Buhari and
Godwin Emefiele, governor of the Central Bank of Nigeria, have insisted on the
current exchange rate regime as the best option for Nigeria at this time when
oil prices are below $100.
SOUTH AFRICA AS AFRICA’S BIGGEST
ECONOMY?
Charlie Robertson, the global
chief economist at Renaissance Capital, made this known on Tuesday while
explaining a slowdown in South Africa’s economy in 2018.
“South Africa GDP slowed from
1.4% to 0.8%, but that was still big enough to make it Africa’s biggest economy
in 2018 at market exchange rates,” he said.
“We prefer market exchange rates
because PPP dollars (which put Nigeria top) don’t buy you a Toyota. Or an oil
refinery for that matter.”
South Africa GDP slowed from 1.4% to 0.8%, but that was still big enough to make it Africa's biggest economy in 2018 at market exchange rates. We prefer market exchange rates because PPP dollars (which put Nigeria top) don't buy you a Toyota. Or an oil refinery for that matter pic.twitter.com/TEoA98UCeY— Charlie Robertson (@RencapMan) 5 March 2019
How do Africa's economies rank right now? We don't really know but there is a good argument that SA is first, Kenya again beats Ethiopia pic.twitter.com/nCKlOyjFn0— Charlie Robertson (@RencapMan) 11 October 2017
Africa's economies ranked by size. Nigeria 1st, Egypt 2nd and SA in 3rd place. Size relative to India/California helps explain news coverage pic.twitter.com/nJBSFiUOA1— Charlie Robertson (@RencapMan) 11 October 2017
In a note to investors seen by
TheCable, RenCap said early March that for Nigeria’s GDP to grow faster than
its population, oil prices will have to double or the country will have to
diversify the economy and pursue industrialisation.
“To diversify the economy,
Nigeria must accelerate the rise of adult literacy, aiming for at least 80% as
soon as possible,” RenCap said.
“To ensure the north is not left
behind, Nigeria will need to enact an adult education campaign, similar in
scale and impact to that pursued by South Korea in the 1950s.”
The research and insight firm
added that 100 percent adult literacy also will not fix the problem if the
country does not fix electricity.
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