Nigeria Overtakes South Africa as Continent's Largest Economy
Tuesday, 05 November 2013 11:42
Nigeria is expected to release revised economic numbers from 1990 to 2008. That is expected to show that the country has overtaken South Africa as Africa's largest economy.
With us to discuss all this is professor at the University of Massachusetts Amherst Léonce Ndikumana. He is a professor of economics at UMass Amherst, as I mentioned, and he's the director of the African Policy Program at the Political Economy Research Institute (PERI).
Thank you for joining us.
LÉONCE NDIKUMANA, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Thank you very much for the opportunity.
DESVARIEUX: So, Professor, let's talk about Nigeria. It's moving to become the number-one economy on the African continent. What is the cause behind this rapid economic growth?
NDIKUMANA: Thank you very much. I think this is a very important and interesting question.
There are two things that we need to single out. One is that even as of today, Nigeria is the second-largest economy on the continent, with about $262 billion in 2012, compared to $384 billion GDP for South Africa.
The second one is that Nigeria had been growing quite fast. In 2011, they grew by 7.4 percent, which that went down a little bit to 26.6 percent in 2012. At the same time, South Africa's been growing a little bit slower, in the range of 2 to 3 percent, which is consistent with a more mature economy. So that by itself would mean that over time Nigeria is going to get closer and closer to South Africa. Even if you look at the last 12 years, in 2012 the economy of South Africa was about three times larger than the economy of Nigeria. Now it's about 1.5 percent.
Now you bring in another factor, which is the rebasing of the national data in Nigeria, which is something that other countries are going to also have to undertake because their national accounts based on outdated--have outdated bases, in the sense that some sectors which were not there when they were doing the calculations now are more predominant in production of goods and services. One of the biggest new innovation is the telecom sector, which is becoming a bigger and bigger part of the service sector. So this requires countries to go back in their statistics and redo the weighting of each economic sector. And this, for many countries, is going to result in a larger major amount of national output, which is GDP. Ghana has already done it, and Nigeria is on track of releasing their new statistics. And this will result in a larger GDP for Nigeria. And, again, as you said, it may be the case that they may be either closer, even take over South Africa, assuming that South Africa doesn't do the rebasing [incompr.]
DESVARIEUX: And I can imagine what's propelling this rapid growth is that three-letter word, oil, since Nigeria has a lot of it. What do you make of that?
NDIKUMANA: Yes. As you indicated, the rapid growth in Nigeria over the past years is driven mainly by the oil sector. To give you an example, of the six point--while the country as a whole grew by 6.6 percent in 2012, the oil sector actually grew faster, by 8 percent, which means that some of the sectors were shrinking. And this poses--is a source of concern because oil, the oil sector, as we know, is a very capital-intensive sector, which means that it doesn't create lots of jobs.
At the same time, since we're talking about South Africa and Nigeria, they share two important problems. One is unemployment, and the second is [incompr.] to global markets, shocks in global markets. Unemployment has been high in South Africa. It's known. And they have very good statistics. It's about 25 percent. In fact, Nigerian unemployment over the past two years has been increasing from 21 percent to 24 percent. So even as the economy's growing in Nigeria, unemployment is actually growing at the same time, which is the result of the fact that growth is taking place in sectors that are not creating employment. So this is a major, major problem for Nigeria.
At the same time, the sectors which are the life--which provide the life for the majority of the population, especially agriculture, is not growing as fast, because there has not been sufficient investment in technology so that productivity in agriculture, the mainstay of the livelihood of the population, is actually seeing a decline in productivity. And that is true for Nigeria as well for many other countries. So the challenge for Nigeria is how to harness these oil resources so that the growth in revenue that's coming from oil can actually trigger expansion in other sectors outside of the oil sector.
DESVARIEUX: Alright, Professor Ndikumana. Thank you so much for joining us.
NDIKUMANA: Thank you very much.
DESVARIEUX: And thank you for joining us on The Real News Network.
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