South Africa and Egypt are closing in on Nigeria in terms of economic size, despite having only a fraction of the population of the West African country.
The gap between Africa’s top three economies put Nigeria well ahead of South Africa and Egypt back in 2014.
While Nigeria’s economy was valued at $568 billion following a rebasing exercise that saw it become the continent’s largest economy, South Africa and Egypt had Gross Domestic Product (GDP) of $381 billion and $305 billion respectively in 2014, according to data from the International Monetary Fund.
Nigeria remained the largest economy in 2021, but the gap between Africa’s most populous nation and the two other economies has narrowed.
After leading South Africa and Egypt with as much as $187 billion and $263 billion respectively in 2014, Nigeria now leads with only $23.5 billion and $38.7 billion. That means South Africa has cut the gap to Nigeria by 87 percent while Egypt has reduced its gap by 85 percent.
South Africa and Egypt have been able to steal a march on Nigeria because its GDP has lost 22.3 percent since 2014 to $441.5 billion in 2021 while South Africa and Egypt have gained 9.6 percent to $418 billion and 31.8 percent to $402.8 billion respectively in that period.
The three economies have taken different turns since 2014 and the slimmer gap in GDP shows that Nigeria has not made the right economic choices.
“Nigeria’s economy is losing ground to South Africa and Egypt due to a combination of the naira devaluation, decaying infrastructure and poor economic policies of the government,” said Taiwo Oyedele, an economist and a partner at a consulting firm, PwC Nigeria.
The naira has depreciated by 161 percent to N418 per dollar as at April 22 from N160 per dollar as at January 2014, according to data from the Central Bank of Nigeria.
“South Africa has the best infrastructure on the continent and Egypt has made efforts in improving its investment landscape; in Nigeria’s case, we have worked hard, not smart,” Oyedele said.
Egypt took a different path to monetary policy in 2016 when it floated its exchange rate to attract foreign investment while Nigeria insisted on a tight peg that only came unstuck when dollar demand outstripped supply.
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South Africa, on the other hand, has invested more in critical infrastructure and has aggressively courted private capital.
Some business leaders said South Africa and Egypt had been pounding pavements to enable the private sector but the same could not be said of Nigeria.
“Our GDP has been shrinking because the government has been keen on growing the economy through debt rather than private capital which increases productivity and creates jobs,” said Muda Yusuf, chief executive officer of the Centre for the Promotion of Private Enterprise.
“There is no evidence of a country that grew its economy, created jobs and reduced poverty rate without enabling the private sector to thrive,” Yusuf added.
Nigeria has the highest unemployment rate of the three top economies in the continent, beating South Africa in 2021 to Africa’s second highest unemployment rate after Namibia.
Nigeria’s ranking on the ease of doing business may have improved since 2014, but private businesses still decry inadequate infrastructure, access to foreign exchange and tax multiplicity as key challenges faced in the country.
“The numbers clearly show that Nigeria is worse off today than in 2014 when you look at inflation, poverty and GDP growth and most businesses have been affected except for a few outliers,” said Johnson Chukwu, the CEO of Cowry Asset Management Ltd.
The country heads to the polls next year to elect a new leader after an eight-year rule by President Muhammadu Buhari who has struggled to reduce poverty and create sufficient jobs.
Nigeria looks set to be home to the third-largest number of people globally by 2050, and the steps taken from 2023 will determine if the economy remains stuck in reverse or finally delivers on its much-touted potential.
“It is why the next election must deliver better leadership,” Yusuf said. “Oil is no longer enough to grow Nigeria’s GDP and a leader who understands this will help, otherwise the economy will continue shrinking and poverty will deepen.”
