By Collins Nweze
Nigeria’s economy will surpass that of South Africa sooner than previously expected, Renaissance Capital (RenCap) has said.
Reuters also said Nigeria’s plan to rebase its Gross Domestic Product (GDP) will enable it to project its power on the world stage and may pose a serious challenge to South Africa’s position as the dominant force on the continent
RenCap, the global investment and research firm in its latest report, said the Nigerian economy, growing at a high-single-digit rate, will be driven by key sectors of the economy such as telecommunications and banking. The growth is also projected to be supported by the proposed review of Nigeria’s Gross Domestic Product (GDP) early next year.
“We see the likely upward revision of GDP as affirming the country’s attractiveness as an investment destination, in addition to the increasing opportunities outside the hydrocarbons sector, such as its growing middle class, which is positive for consumer stocks,” RenCap said.
It projected that Nigeria’s economy is likely to significantly exceed $250 billion after it is rebased from 1990 to 2008, as being championed by the Nigeria Bureau of Statistics (NBS).
Most countries rebase their GDP on a regular basis (usually every five years in the West) to account for changes in production and consumption. “We think the most obvious change in Nigeria is the sharp rise of the telecommunications industry over the past two decades. We expect the rebasing of Nigeria’s GDP to result in a significant upward revision,” it said.
It said the structure of the economy is likely to change, with agriculture shrinking and services industries growing.Output from Nigeria’s agriculture sector presently accounts for around 40 per cent of overall GDP, one of the highest ratios in Africa. “While the agriculture sector is likely to remain a significant economic provider, we expect the rebased GDP numbers to reveal a smaller contribution,” RenCap said.
The research firm also projected that the budget ratios to GDP and public debt ratios to GDP will improve. It said one of Finance Minister Dr Ngozi Okonjo-Iweala’s immediate challenges is to reduce the budget deficit, following its significant deterioration in 2009 and 2010 to 10.2 per cent and 8.5 per cent of GDP, respectively, from a surplus in 2008, according to the International Monetary Fund (IMF) data.
It said Nigeria’s relatively low public debt to GDP ratio, which is in the high teens, is expected to drop even further following the rebasing, making the government one of the least leveraged in the world, compared with overleveraged Europe.
According to the IMF, the size of the country’s economy this year ($247 billion) is projected to surpass that of Egypt’s ($232 billion) and South Africa to become Africa’s largest economy in terms of GDP.
Meanwhile, Reuters noted that the revaluing will advance Nigeria’s aim to be an African investment hub rivaling South Africa and make it more attractive for prized foreign investment, if its economy turns out to be nearly as big as its rival’s, analysts say.
That could also advance its claim to a permanent seat on the United Nations’ Security Council, if a proposal to expand the Council goes ahead, but Nigeria must tackle endemic corruption and unreliable power supplies to if it is to make progress.
A similar increase for Nigeria’s $247 billion economy would bring it to $395 billion, much closer to the continent’s top economy, South Africa — cur
via The Nation
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