South Africa has overtaken Nigeria as Africa’s biggest economy in dollar terms, Bloomberg reports.
The change in status of both countries was attributed to the appreciation of the rand, South Africa’s currency, and the devaluation of the Nigerian naira.
Nigerian government through its apex bank – Central Bank of Nigeria (CBN) recently introduced a flexible foreign exchange regime.
Using the Gross Domestic Product (GDP) at the end of 2015 published by the International Monetary Fund, Bloomberg reported that the size of South Africa’s economy was $301 billion at the rand’s current exchange rate, while Nigeria’s GDP was put at $296 billion.
The report stated that the rand has gained more than 16 per cent against the US currency since the start of 2016, while in contrast, Nigeria’s naira has lost more than a third of its value.
Despite the statistics, both countries are still at the risk of recession, having contracted in the first quarter of the year. Nigeria’s economy shrank by 0.4 per cent, while South Africa’s GDP contracted by 0.2 per cent. Two weeks ago, Nigeria’s minister of finance, Mrs Kemi Adeosun told the Nigerian Senate that Nigeria is “technically in recession” after months of insisting that the economy was doing well.
Nigeria has suffered amid low oil prices occasioned by the resurgence of militancy in its oil-rich Niger-Delta region, while South Africa is sensitive to shifts in the commodity cycle.
“More than the growth outlook, in the short term the ranking of these economies is likely to be determined by exchange rate movements,” economist Alan Cameron said.
Cameron however stated that Nigeria was unlikely to be unseated as Africa’s largest economy in the long run, but added that “the momentum that took it there in the first place is now long gone”.