Nigeria overtakes South Africa as Africa’s largest economy

With South Africa’s economy effectively going into recession, second time in two years, and its economy shrinking by 1.4%, Nigeria has overtaken the country as Africa’s largest economy.

Both countries account for almost half of sub-Saharan Africa’s gross domestic product.

The fourth-quarter decline had occurred following a revised 0.8% contraction in the third quarter, pushing South Africa into its second recession in two years. This places Nigeria’s economy at the top of the continent after much debate about which economy is the largest.

The debate began due to differences in Nigeria’s exchange rate – with the official naira rate of 306 per dollar and weaker market exchange rate of around 360 – but with South Africa sliding into recession, either of the exchange rates makes Nigeria’s economy the largest, posting $476 billion or $402 billion, depending on the rate used.

This is because while South Africa’s economy underperformed in the fourth quarter last year, Nigeria experienced growth in its economy, surpassing forecasts due to oil output increased and the central bank took steps to boost credit growth.

But South Africa’s economy was the opposite, contracting more than projected in the fourth quarter as power cuts negatively affected output and business confidence. It was disclosed that South Africa recorded 0.2% expansion for the full year, making it the least since the global financial crisis.

The expansion was, however, reported to be less than the South African central bank and government projected estimation. Based on an average rand-dollar exchange rate of 14.43 for the year, the GDP was $352 billion.

But while International Monetary Fund cut its forecast for Nigeria’s 2020 growth from 2.5% to 2%, last month, Nigeria’s economy is expected to continue growing, even faster, but South Africa’s GDP is projected to expand only by 0.8%.