EDITORIAL: The real lesson of Nigerian GDP - BDlive
2014-04-08 05:33
JUST in case anyone thought South Africa was reacting badly to its ousting by Nigeria in the African economic rankings, a media release from the Treasury set us all right.
It’s not a competition, the Treasury seemed to be saying. We are all winners here. The Treasury graciously welcomed the announcement, which it said gave concrete expression to the "Africa rising" story. "SA has been and will continue to benefit from faster economic growth in the rest of the continent," it said.
The Nigerian economy’s rapid growth is one, quite minor, reason why it has now raced ahead of South Africa to become Africa’s largest economy, with gross domestic product (GDP) now estimated at $510bn compared to South Africa’s $350bn.
The major reason is technical: where South Africa’s official statisticians routinely rebase and rebenchmark our GDP figures every five years, Nigeria’s statistics agency had not done so since 1990.
Inevitably, the revision they have now finally done has had a huge effect — indeed, the 89% jump in Nigeria’s revised GDP is much larger than the market had expected.
It means, for example, that Nigeria’s fiscal ratios get better, but its balance of payments ratios get worse. And the international ratings agencies have not changed their view of Nigeria one bit, reinforcing the fact that the new figures simply put official numbers to what analysts already knew.
It is tempting not to take Nigeria’s change of status to number one too seriously.
The numbers have changed on mere technical grounds. Nigeria’s sovereign credit rating, at double B minus on the Fitch Ratings scale, is still some notches below South Africa’s. And although its revised GDP is 60% higher than South Africa’s, on a per capita basis it is far lower, so Nigeria’s people are still poorer.
And it is still a far less developed economy than South Africa’s, with very inadequate infrastructure — Nigeria’s national electricity grid wouldn’t do much more than supply Johannesburg at peak hour — a poorly developed financial sector and, crucially, continued overreliance on oil. Even so, Nigeria’s economy has been growing at more than 6% a year for some years now, and the revisions to the GDP figures highlight the extent to which this is an economy that is developing and diversifying. Key to the revisions were new sectors, such as mobile telecommunications, which had not been counted, and others which had been undercounted. And the nature of the economy turns out to be much changed, with less reliance on agriculture and oil, and a big jump in the size of the services sector, which now makes up more than half of Nigeria’s economy.
Telecommunications, for example, has grown to 9% of GDP and manufacturing to 7%. These are signs of an economy which is becoming, well, more of an economy. That will allow for more broad-based growth in future. Over time too, the higher GDP may help to put Nigeria on investors’ radar screens and over time help to improve its credit ratings.
Most importantly, over time the rapid economic growth rates — a revised 7.4% last year for example — will improve the lives of Nigeria’s people and, given its huge population, make it an even more attractive investment destination.
Importantly, as the Treasury points out, South Africa’s private sector is already there. And what’s particularly striking is that South African companies have a strong presence in precisely some of those sectors which have grown fastest and are the largest components of the services sector — wholesale and retail, and telecommunications.
South Africa’s connectedness to the rest of Africa is, or should be, one of its key competitive advantages. The better our continental neighbours do then, the better it should be for us — as long as we make sure we are positioned to make the most of it, rather than to see it as a competition.
JUST in case anyone thought South Africa was reacting badly to its ousting by Nigeria in the African economic rankings, a media release from the Treasury set us all right.
It’s not a competition, the Treasury seemed to be saying. We are all winners here. The Treasury graciously welcomed the announcement, which it said gave concrete expression to the "Africa rising" story. "SA has been and will continue to benefit from faster economic growth in the rest of the continent," it said.
The Nigerian economy’s rapid growth is one, quite minor, reason why it has now raced ahead of South Africa to become Africa’s largest economy, with gross domestic product (GDP) now estimated at $510bn compared to South Africa’s $350bn.
The major reason is technical: where South Africa’s official statisticians routinely rebase and rebenchmark our GDP figures every five years, Nigeria’s statistics agency had not done so since 1990.
Inevitably, the revision they have now finally done has had a huge effect — indeed, the 89% jump in Nigeria’s revised GDP is much larger than the market had expected.
It means, for example, that Nigeria’s fiscal ratios get better, but its balance of payments ratios get worse. And the international ratings agencies have not changed their view of Nigeria one bit, reinforcing the fact that the new figures simply put official numbers to what analysts already knew.
It is tempting not to take Nigeria’s change of status to number one too seriously.
The numbers have changed on mere technical grounds. Nigeria’s sovereign credit rating, at double B minus on the Fitch Ratings scale, is still some notches below South Africa’s. And although its revised GDP is 60% higher than South Africa’s, on a per capita basis it is far lower, so Nigeria’s people are still poorer.
And it is still a far less developed economy than South Africa’s, with very inadequate infrastructure — Nigeria’s national electricity grid wouldn’t do much more than supply Johannesburg at peak hour — a poorly developed financial sector and, crucially, continued overreliance on oil. Even so, Nigeria’s economy has been growing at more than 6% a year for some years now, and the revisions to the GDP figures highlight the extent to which this is an economy that is developing and diversifying. Key to the revisions were new sectors, such as mobile telecommunications, which had not been counted, and others which had been undercounted. And the nature of the economy turns out to be much changed, with less reliance on agriculture and oil, and a big jump in the size of the services sector, which now makes up more than half of Nigeria’s economy.
Telecommunications, for example, has grown to 9% of GDP and manufacturing to 7%. These are signs of an economy which is becoming, well, more of an economy. That will allow for more broad-based growth in future. Over time too, the higher GDP may help to put Nigeria on investors’ radar screens and over time help to improve its credit ratings.
Most importantly, over time the rapid economic growth rates — a revised 7.4% last year for example — will improve the lives of Nigeria’s people and, given its huge population, make it an even more attractive investment destination.
Importantly, as the Treasury points out, South Africa’s private sector is already there. And what’s particularly striking is that South African companies have a strong presence in precisely some of those sectors which have grown fastest and are the largest components of the services sector — wholesale and retail, and telecommunications.
South Africa’s connectedness to the rest of Africa is, or should be, one of its key competitive advantages. The better our continental neighbours do then, the better it should be for us — as long as we make sure we are positioned to make the most of it, rather than to see it as a competition.
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