Nigeria GDP sums won't boost growthComment on this story
Nigeria's plans to change the way it calculates the size of its economy will soon inflate it by an extra 40 percent, but analysts say that won't alter the pace of real economic growth, a Reuters poll showed on Wednesday.
Most governments overhaul gross domestic product calculations every few years to include changes in output and consumption, such as mobile phones and the Internet. Since Nigeria has not done so since 1990, analysts expect a large jump in nominal GDP during the second quarter.
Africa's second biggest economy should then post GDP of around $370 billion, up from a current IMF estimate of $270 billion and just $20 billion shy of South Africa in dollar terms.
Economists tip Nigeria to take the top spot in the near future by keeping up its steady rate of economic growth.
“The rebasing exercise is unlikely to increase the pace of growth unless becoming the largest economy in sub-Saharan Africa generates new foreign direct investment,” said Nema Ramkhelawan-Bhana, Africa analyst at Rand Merchant Bank.
The poll of 11 analysts shows growth in Africa's most populous nation slowing to 7.0 percent this year from 7.4 in 2011, and then reaching 7.1 percent in 2013 as disruptions to oil production put a slight dampener on growth.
That looks more optimistic than government expectations for growth to slow to 6.5 percent this year. Nigeria's economy grew 6.17 percent in the first quarter of this year, down from 7.68 percent in the previous quarter.
With South African annual growth seen at around half that, Nigeria could be ahead in just a few years.
Investors are eyeing the 140 million population closely, looking to explore opportunities in a number of sectors such as retail and telecommunications.
Wal-Mart, the world's biggest retailer, last year spent $2.4 billion on a majority stake in South Africa's Massmart, a discounter with a growing presence on the continent, and now scoping for 20 stores in Nigeria.
Oil production meanwhile fell to an average of 2.35 million barrels a day (bpd) in the first quarter of 2012, from 2.4 million bpd in the fourth quarter of 2011.
Despite the growing wealth in the nation there is a still a huge rich-poor divide, which will remain a fact after the changes to GDP calculations.
“While the increase in nominal GDP will improve the country's income classification, it will do little to reduce income inequality,” Ramkhelawan-Bhana said.
INFLATION STUBBORNLY HIGH
Analysts project inflation to remain stubbornly above double digits - this year it should average 12.6 percent and then slow to 10.5 percent in 2013.
“We expect it to remain around current levels into early 2012, before picking up modestly in the middle of 2012 to around 13 percent before easing in the second half and into 2013,” said David Cowan, economist at Citi.
A poll conducted last month on the naira showed that the currency would hold steady but the threat of rising inflation could hamper this.
The naira has lost almost a percent since the start of the month after inflation rose to 12.9 percent in April year-on-year from 12.1 percent in May, driven by non-food items.
Analysts also attribute the naira's recent weakness to a fall in confidence in the local currency, a flight to safety by risk averse investors and poor fiscal management.
A solution to this could be a Sovereign Wealth Fund which Central Bank governor Lamido Sanusi has been punting for.
“The effective launch of the Sovereign Wealth Fund and more fiscal restraint at the federally consolidated level would certainly contribute to such a turnaround,” said Samir Gadio, emerging markets strategist at Standard Bank. - Reuters