That Nigeria is now Africa’s largest economy is the best news South Africa could have hoped for. This milestone not only gives South Africa the most obvious reason to strengthen its ties with a key player growing in clout, but it also affords South Africa the best possible opportunity to reflect on itself.
As forecasts go, Nigeria should be among the world’s 15 largest economies by 2050, when its gross domestic product (GDP) is projected to exceed $4.5 trillion (R47 trillion) in purchasing power parity terms or, in other words, on the basis that in relative terms the naira can buy the same basket of goods as the dollar at that particular time.
This prediction came from credit rating agency Moody’s Investors Service last week, and it is also shared by Jim O’Neill, a former chairman of Goldman Sachs Asset Management, who wrote in a column last week that Nigeria stood a much better chance of being in the top 15 by 2050 than of being among the world’s top 20 economies by 2020. That goal, O’Neill said, was too soon to be likely.
And I would tend to agree with him as there remain formidable structural obstacles for Nigeria to overcome in the short to medium term, as is the case for South Africa and many of the continent’s other economies. Even so, there could not be a better indication that Africa is on the rise than Nigeria’s economic ascent.
Last week, Nigeria completed an exercise to recalculate the constituents of its economy, and the result was news that the country’s 2013 nominal GDP was $510 billion, 80 percent higher than previously reported.
On that scale, Nigeria became a front-runner overnight. It now ranks as the 26th largest economy in the world, surpassing not only South Africa ($356bn: 2013), but Austria, Venezuela, Colombia, Thailand, Denmark, Malaysia and Singapore.
So in many ways, Nigeria’s ascent to the top of the economic league in Africa marks an important development for the African continent as a whole. For the first time, there is now the clearest sign of the changing economic fortunes in this part of the world.
Though many remain sceptical about Africa’s true economic potential, there is a growing body of evidence to show that those who underestimate Africa’s prospects do so at their own peril.
And this brings me back to South Africa.
I do not subscribe to the notion that Nigeria’s gain is South Africa’s loss. Africans do not believe that Africa’s prosperity will come about as a result of some popularity contest between countries.
In fact, this point was reiterated by Gill Marcus, the governor of the SA Reserve Bank, when she said recently that the issue was “how do we use our different strength to benefit Africa as a whole”.
South Africa has often talked about the need to build linkages that will lead to a more integrated Africa, from Cape Town to Cairo. But now, Nigeria has also come into full view, which means that the emerging future requires South Africa to pursue a more multi-dimensional approach in engaging with the rest of the continent.
This approach begins with recognising that South Africa’s future is inextricably linked to that of Africa. That is how Rob Davies, the Minister of Trade and Industry, put it last week.
With a population of 170 million and oil reserves estimated at around 37.2 trillion barrels (or roughly 28 percent of total African reserves), it should be no surprise that Nigeria has turned out to be the largest economy in Africa.
More than anything, Nigeria represents an important catalyst to fuel the emergence of a more dynamic economic landscape on the African continent.
From what I hear, it sounds as if South Africa understands what is at stake and its role in bringing about this dynamism. Moreover, it appears as if South Africa also recognises the opportunities that are inherent in Nigeria’s economic rise.
And to be sure, this past week I sat down with Davies for a conversation on his tenure, and in his remarks he hinted that South Africa could even possibly begin pushing for Nigeria’s inclusion into multilateral institutions such as the Group of 20 (G20) in order to strengthen Africa’s voice in the global governance structures.
If that happens, it would be the smartest thing to do. In fact, Africa should not have to wait for 2050 before Nigeria joins South Africa in the G20.
Even with its displacement from the top, South Africa’s economy remains about three times larger on a per capita basis, its regulatory institutions remain the best on the continent, and its financial markets and banking institutions are deemed to be the strongest in Africa.
What that really means is that, going forward, South Africa and Nigeria will have to find ways to compliment each other’s strengths and find ways to draw from the experiences of others to tackle the perennial problem of chronic corruption, an all too present problem in both countries. Everything else should then follow from that.