Nigeria’s‘GreatLeap’Past South Africa

　　In a long overdue exercise， the National Bureau of Statistics of Nigeria recalculated the country’s GDP，dethroning South Africa as Africa’s largest economyearlier this year. While the rebasing of economic outputis a standard procedure usually done quite regularly bycountries， Nigeria has not recalculated its GDP in morethan 20 years. With a population of at least three timesthe size of the incumbent number one economy in Africa，Nigeria’s claim of the economic pole position in Africa didnot come as a surprise. Its rise to the top was inevitableand arguably the only surprise may have been that it tookthe West African giant of 170 million people so long to doso.

　　Announced on April 6， 2014， this meant that literallyovernight， Nigeria’s economic output almost doubled，growing by 89 percent to $510 billion. Nigeria thus leaptpast South Africa， taking the economic lead by more than$150 billion in GDP terms.

　　One month later， Abuja played host to the prestigious24th World Economic Forum on Africa from May7-9， 2014， previously a fixture in Cape Town. Attendedby more than 1，000 political and business leaders fromacross Africa and the world， representing more than 70countries， the forum was expected to be a key platformto support the country’s economic rise by lifting its internationalprominence. It however only further exposed thecontrasts that the country represents in light of mountingsecurity concerns.

　　Under the theme “Forging Inclusive Growth； CreatingJobs，” two key issues were at the forefront of the WEFAbuja discussions： While Africa and countries such asNigeria have built much economic momentum anda more attractive and investable brand froma decade ago， a more secure and peacefulenvironment is required in order to attractboth foreign and African investmentand for positive spillovers from growth totake root. These spillovers will need to resultin more inclusive growth – that is growth thatcreates employment opportunities for Africans.

　　Creating jobs will reduce the number ofpeople taking the easy way out and turningto crime and terrorism. In Nigeria especially，the activities of militant Islamist group BokoHaram have been mainly in the poorest regions in thenorth， and less in the oil-rich south.

　　In this regard， Aliko Dangote， mooted to be Africa’srichest man， made the announcement at the summitto invest $2.3 billion in sugar and rice production in thenorth of the country， in order to reduce unemploymentin the region and quell resultant insurgencies. As a visibleproposed recipe to fight terror， actions of the NigerianGovernment in tackling the situation are perhaps lessclear， except for President Goodluck Jonathan callingthis as “the beginning of the end of terrorism.”

　　Bragging rights aside， and given recent events，Nigeria’s fundamentals have not changed with therecalculations done by the National Bureau of Statistics- something that other countries do every five yearsor so. Nigerians did not wake up to find an extrastash of Naira， the local currency， in their walletswith the announcement.

　　A closer look at Nigeria’s rebased statisticsoffers a gleam of hope， as the rebasing suggeststhat the West African economy has slowlystarted to diversify away from a mono-resourceeconomy. Non-resource sectors such as filmproduction， the creative industry and telecommunicationare increasingly playing a moreimportant role in Nigeria’s economy and haverevealed strong growth rates under the rebasedregime. Nevertheless， the rise of new sectors isyet to reduce Nigeria’s over-dependency on oilexports.

　　In addition， no number crunching exercise in the worldcan hide the fact that Nigeria’s economy still has a longway to go to reach the structural， institutional and businesssophistication that is seen in South Africa’s economy.

　　Major challenges such as insufficient infrastructure，corruption， and socio-ethnic tensions beg to be overcomein order for Nigeria to reach its full potential and tocreate wealth for its people. As such， while leading as theeconomic powerhouse of the region， no rational investoror fund manager is going to turn around and say “Nigeriajust doubled its GDP， let’s go there and invest” withoutweighing up other elements considered in an investmentdecision.

　　One such element will continue to be the securitychallenges still facing the country and region. The securitysituation at WEF Abuja， following two car bombings onlytwo weeks before the forum， as well as the kidnapping ofmore than 200 school girls in a northeastern province， allclaimed by Boko Haram， overshadowed the forum bothvisibly by the military and security presence on theground， as well as a key theme across various thematicdiscussions.

　　That said， the single most important aspect thatundoubtedly attracts prospective investors and playersto Nigeria is its massive population. Nigeria is a numbersgame. And therein lies a key challenge. It seems thattoo often economic commentators and politicians areobsessed with quantity and “big numbers.” In order tocreate a viable and vibrant economy and to addresssocio-economic issues such as poverty， unemploymentand inequality， governments have to focus on the qualityof growth and not necessarily only the speed or quantitythereof. Emphasis also needs to be placed on creating anenvironment that is enabling and conducive to sustainedinvestment and growth going forward. This is achievedthrough， inter alia， the right set of policies， good governanceand the creation of a favorable business environment.

　　As a result， South Africa being dethroned by Nigeriadoes not mean much in broader terms， yet. Despitepersistent infrastructure challenges， South Africa stillenjoys some of the most advanced infrastructure on thecontinent. The Johannesburg Stock Exchange remains themost sophisticated， best governed and largest exchangein Africa. And the southern African powerhouse also continuesto be Africa’s largest recipient of portfolio flows andranks as the largest holder of inward FDI stock on the continent.

　　South Africa is also a leading source of outboundFDI. In fact， it is the only African economy with a sizeablenumber of competitive multinational companies investingin the continent - estimated in 2011 to be the fifth largestholder of FDI stock in Africa.

　　However， this does not mean South Africans cansit back and rest on their laurels. South Africa seems tohave become too comfortable in its position as the mostadvanced regional economy and has shown signs ofcomplacency. Already， in 2013， South Africa lost its firstplace ranking as Africa’s most competitive economy toMauritius in the World Economic Forum’s annual GlobalCompetitiveness Report. Beyond making a dent in thecountry’s ego， Nigeria’s rise to economic supremacy inAfrica may serve as the much needed wake-up call forSouth African corporates and politicians to reflect on theeconomic and political structure and resultant challengesof South Africa. This needs to be done to find ways toimplement and see through the right set of policies， to ensuregood governance and to create a favorable businessenvironment that will see South Africa reach its futureeconomic potential.