LAGOS, Nov 11 – Nigeria’s plan to rebase its 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.
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.
The country will in January change the base year for its gross domestic product (GDP) to 2008 from 1990, a move that could lead to a “huge jump” in the estimated size of Africa’s second biggest economy, the national statistics chief Yemi Kale told Reuters on Thursday.
Most governments overhaul GDP calculations every few years to reflect changes in output and consumption, such as mobile phones and Internet usage, but Nigeria has not done so since 1990.
When Ghana made rebased its vital statistics last November, output shot up by 60 percent.
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 — currently at $422 billion.
And with growth expected at 7-8 percent this year, compared with 3 percent in South Africa, the picture of an emerging giant set to take first place in Africa is an easy sell.
“Nigeria is like a green field in terms of investment … a global investment destination,” President Goodluck Jonathan told an economic forum in the capital Abuja on Thursday.
A recalculation showing a much bigger economy will strengthen that investment case, and Nigeria’s political clout.
“It will help focus policy-makers on Nigeria as an emerging economy that needs to be taken seriously,” said Chatham House’s Alex Vines. “Forecasters are talking about Nigeria by 2050 being a G20 economy. The commercial sector already understands that Nigeria could eclipse South Africa fairly quickly.”
“LEADER OF AFRICA”
Couple that with Nigeria’s frontier status — 150 million people in a fast growing country suffering from chronic underinvestment in infrastructure — and it looks attractive.
By contrast, said Vines, “commercial people are talking about South Africa as a mature market that is declining,” partly due to labour and other policies that hurt its competitiveness.
South Africa is still regarded from outside as the main route for investment into sub-Saharan Africa. That could change if Nigeria’s efforts to clean up its capital markets work — and if it can break longstanding infrastructure bottlenecks.
“They’ve always had immense ambition to be a world leader and leader of Africa,” said Richard Dowden of the Royal African Society. “If their economy turns out to be much bigger than anyone thought, then that gives that a great boost.”
But the government of South African President Jacob Zuma still has clear advantages. Its institutions function properly, and it is seen as having the one of the best legal systems in Africa.
Nigeria, on the other hand, has tended to be a byword for corruption, fraud and mismanagement — seen in its persistent failure to sort out its roads or power problems.
“Let’s not forget that Nigeria remains significantly underdeveloped in terms of basic infrastructure and faces very high income inequality,” said Standard Bank’s Samir Gadio.
“This negative perception will not dissipate just because of the revision in aggregate GDP.”
By Tim Cocks
Source: Reuters Africa newsletter
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