Nigeria’s economy largest in Africa as
rebasing boosts GDP to $405bn
December 19, 2013 | Filed under: main
story | Author: PATRICK ATUANYA
In about three weeks from now, when
the National Bureau of Statistics (NBS)
releases the rebased Gross Domestic
Product (GDP) it will show that Nigeria has
overtaken South Africa as Africa’s largest
economy, which will have great economic
and geopolitical implications.
This is according to emerging markets
focused investment banking firm
Renaissance Capital, whose team of
analysts were in Abuja, over the weekend.
“We are revising up our estimate of
Nigeria’s GDP by 53 percent. The NBS has
nearly completed its work, and our new
estimate is that a 45 percent to 60
percent uplift is likely, and we are taking
53 percent as the mid-point figure. We
expect the data in January,” said
Renaissance Capital analysts led by Charles
Robertson, its global chief economist and
head of macro strategy, in a research
report released yesterday (Dec 18).
“This means Nigeria, at $405 bn in 2013
would be the largest economy in Africa,
ahead of South Africa at around $370 bn.”
Other impacts of the rebasing include the
possible reduction of growth rates to 5 –
6 percent from 6 – 7 percent, and an
increase in GDP per capita to $2,400 from
around $1,700, in essence moving Nigeria
into middle income economy territory.
“Sectors that may show the biggest
upward revision range from Nollywood to
IT and telecoms, while we think
agriculture will shrink from around 40
percent of GDP to 25 – 30 percent of GDP,”
said Robertson.
The rebasing will show public debt
shrinking to 13 percent of GDP from 20
percent of GDP. Public external debt would
be below 2 percent of GDP, while the
current account surplus may still be 5
percent of GDP which will leave the
sovereign in a good position to borrow if
needed.
According to Rencap “In a Fed tapering
world, these revisions make Nigeria look
good, but credit rating upgrades (Ba3/
BB-) are likely to be constrained by the
most competitive presidential elections
Nigeria will have seen since democracy
returned in the 1990s.”
The NBS is seeking to change the
calculations of Nigeria’s GDP, using a new
base year of 2010 to give a better
indication of the size and composition of
its economy.
Most governments overhaul GDP
calculations every few years to reflect
changes in output and consumption, such
as telecoms, financial services and
internet usage, but Nigeria has not done
so since 1990 (about 23 years)
suggesting that the previous GDP
framework underestimated economic
activity.
The numbers will have new implications
for investors and the geopolitics of
Nigeria’s place in Africa.
“We would be very surprised if recent and
pending investment decisions are taken
on the basis of the 1990 national
accounts,” said FBN capital research
analysts led by Gregory Kronsten, in a note
released in August.
“The new GDP series will however be
tracked by potential investors, such as
suppliers of consumer goods and
services,” Kronsten said.
Nigeria already hosts the second largest
debt and stock markets in Africa, behind
South Africa.
Its stock market is valued at $77 billion,
while the secondary market bond trading
volumes, ”certainly exceed those of Egypt
and Morocco and represent around 20
percent of South Africa’s turnover,”
according to Samir Gadio, an emerging
markets strategist, at Standard Bank, in
London.
Overall – Nigeria’s debt, budget and
current account ratios will look among
the best in Africa and in the emerging
markets (EM), once the rebased figures
are released, notes Robertson.
“We like Nigeria in the coming quarter –
though we see domestic bond yields up a
little, at around 13.5 percent on average.
Nigeria is going to rise from 14 percent of
MSCI frontier markets to around 20
percent in May 2014 which could attract
equity investors wanting exposure to
frontiers and/or Africa. We expect the
NGN to remain at 160/$ until June 2014.
But we are still nervous for the second
half of 2014,” Robertson said.