Africa’s two biggest economies took different trajectories in the second quarter after growth data from their respective statistics agencies show different fates for the rival economies.
While Nigeria saw growth slow 1.94 percent in the review quarter on account of 1.64 percent moderation in the non-oil sector, South Africa on the other hand, printed a 3.1 percent expansion as its economy rebounded from a 3.1 percent contraction in the first quarter.
“South Africa has been chasing pro-growth policies and that is what they are benefiting from,” said Nnamdi Olisaeloka, an analyst at Lagos-based Zedcrest Capital.
“Cyril Ramaphosa has been more inclusive of the private sector. This is what is remarkably absent in Nigeria’s case. Nigeria is still not championing policies that will boost private sector growth.” Olisaeloka posited.
Nigeria’s non-oil sector remains uncompetitive and continues to suffer on account of structural challenges, which have marred economic diversification, employment and growth agenda.
Decrepit infrastructure from power to the road combined with regulatory challenges, foreign exchange woes and paucity of credit to spur growth top list of setbacks for the Nigerian economy.
Both economies continue to grapple with structural challenges, which continue to constrain domestic output, evidenced by their low contribution of manufacturing activities to GDP.
For South Africa, the stateowned power utility firm, Eskom, continues to battle with mounting debt staged by rising costs, crumbling infrastructure, falling revenue and mass-wide corruption.
But growth in the second quarter was boosted by a return of more consistent electricity output, with Eskom managing to keep load shedding at bay.
On the other hand, Nigeria’s power sector has been bedeviled with low liquidity and undercapacity to distribute sufficient power to its populace.
“Nigeria’s low growth figure is a pointer to policymakers to start taking reforms seriously to strengthen investor confidence,” said Emmanuel Noko, senior economist at M&C Business Advisory.
Big global central banks from North America to Asia have embraced monetary accommodation by slashing key lending rates to stimulate growth amid uncertainties in the global economy.
But analysts say that the combination of low interest rates, rising debt profile and trade policy uncertainty has created an environment that neutralises the potency of monetary easing.
“Declining natural interest rates have meant that monetary policy by itself won’t be enough to raise aggregate demand and lift inflationary expectations,” said America-based investment bank, Morgan Stanley.
The disappointing Q2 puts the Central Bank of Nigeria in a dicey position to either cut rate to stimulate growth or hike rate to attract foreign investment at its next meeting scheduled for September 23 and 24.
Olisaeloka believes that the central bank will most likely retain the policy rate at 13.5 percent.
