After the much celebrated declaration of the Nigerian economy as the largest in Africa and 26th in the world, South Africa has pushed the country back, climbing to the top position on the African continent.
The International Monetary Fund, IMF, using the Gross Domestic Product, GDP, at the end of its 2015 report, rated South Africa as the biggest economy in Africa, taking back the first position it lost to Nigeria with a GDP of $301 billion, while Nigeria’s GDP stood at $296 billion.
According to a report by Bloomberg, the South African currency, rand, has gained more than 16% against the US currency since the start of 2016, while the naira has lost more than a third of its value.
South Africa’s economy has regained the position of Africa’s largest in dollar terms, more than two years after losing it to Nigeria, as the value of the nations’ currencies moved in opposite directions.
Based on GDP at the end of 2015 report published by IMF, the size of South Africa’s economy is $301 billion at the rand’s current exchange rate, while Nigeria’s GDP is $296 billion.
That’s after the rand gained more than 16 percent against the dollar, since the start of 2016, and Nigeria’s naira lost more than a third of its value after the central bank removed a currency peg in June.
Both nations face the risk of a recession after contracting in the first quarter of the year. The Nigerian economy shrank by 0.4 percent in the three months through March, from a year earlier amid low oil prices and shortage of foreign currency. That curbed imports, including fuel.
In South Africa, GDP contracted by 0.2 percent from a year earlier, as farming and mining output declined.
“More than the growth outlook, in the short term the ranking of these economies is likely to be determined by exchange rate movements,” Alan Cameron, an economist at Exotix Partners LLP, said.
Although, Nigeria is unlikely to be unseated as Africa’s largest economy in the long run, “the momentum that took it there in the first place is now long gone”.
The South African rand rallied as investors turned to emerging markets with liquid capital markets to seek returns after Britain voted to leave the European Union on June 23, even as the central bank forecast the economy won’t expand this year and the nation risks losing its investment-grade credit rating.
In Nigeria, investors did not flock to buy naira-based assets after authorities removed the peg of 197-199 naira per dollar. The Central Bank of Nigeria, CBN, raised its benchmark interest rate to a record in July, to lure foreign money, even as the IMF forecast the economy will contract 1.8 percent this year.
Nigeria was assessed as the continent’s largest economy in April 2014, when authorities overhauled its GDP data for the first time in two decades.
The recalculation saw the Nigerian economy in 2013 expand by three-quarters to an estimated N80 trillion. The rand gained 1 percent to 13.2805 per dollar at 4:03 p.m. in Johannesburg on Wednesday. The naira weakened 2.7 percent to N320 per dollar. - POST NIGERIA