Nigeria’s Economy is Now Larger Than South Africa’s, But is it Stronger?

One major piece of news that emerged almost unnoticed at the end of 2019, before Nigeria entered another recession, was the revelation that Nigeria had finally overtaken South Africa to become the continent’s largest economy. South Africa has dominated economic affairs on the continent for the past 50 years, with a nominal and PPP GDP that has far outstripped other countries in Africa.

However, Nigeria’s decades-long economic expansion, coupled with the increasing economic turmoil seen in ZA finally resulted in Nigeria taking the top spot. This ranking is, however, purely in terms of economic size, with Nigeria posting a nominal GDP of $444.9 billion, compared to South Africa’s $371.3 billion.

As economists and market pundits will often agree, size isn’t everything. Let’s take a closer look at the numbers to see whether or not Nigeria’s economy is actually stronger and more sustainable than that of South Africa.

Size vs Wealth

While Nigeria has South Africa beaten when it comes to the overall size of the economy, South Africa performs much more strongly when it comes to wealth. If we look at GDP per capita, which is a measure of GDP divided by the total population, thereby giving a representation of the wealth of the citizens of that country, things look different. South Africa has a GDP per capita of $6331.4, compared to just $2233.4 for Nigeria, meaning that South Africans are nearly three times as wealthy as Nigerians. Meanwhile, South Africans take home around $1021 USD per month in wages, compared to just $102 USD per month for Nigerians on average.

Diversified Economies 

Another key measure of the strength of a national economy is how diversified it is. For example, when some people praise the growth of the economy of a country like the UAE, detractors often quickly point out that that majority of income is derived from a single commodity: oil. Again, South Africa has Nigeria beaten hands-down. Major exports for South Africa include metals such as platinum, as well as agricultural products such as wine and grapes, and automobiles. In addition, South Africa has a thriving digital economy, evidenced in part by the proliferation of new online casinos within the country in recent years, which offer cutting-edge real-money online gaming to millions of South Africans in what is a highly competitive industry. In Nigeria, meanwhile, a whopping 88% of all exports consist of petroleum.

Job Opportunities

Job opportunities and social mobility are crucial factors when determining the strength of a nation’s economy. On this measure, things tilt more towards Nigeria’s favour. In 2019, Nigeria enjoyed a total employment rate of 69.9%, which is one of the highest in Africa. In South Africa, meanwhile, total employment hovers at around a dismal 40.3%, which is the worst in living memory for the country. In addition, social mobility, although generally poor in both countries, is higher in Nigeria than in South Africa, with the latter often ranking as one of the worst countries

in the world for social mobility. This means that Nigerians have a statistically better chance of earning more money than their parents.

Trade

In terms of trade, the picture is a little more mixed. The value of South Africa’s exports is considerably higher than Nigeria’s, at $108 billion and $46 billion respectively. However, the rate of growth is higher for Nigeria, given that exports have been declining in South Africa for several years now. It’s worth noting that South Africa is considerably more connected to the global economy than Nigeria is, with comprehensive trade agreements with the EU and US, as well as influential membership of the G20 and the South African Customs Union (SACU), which Nigeria does not enjoy. However, Nigeria’s role on the world stage is growing every day, which will likely improve trade opportunities in the future.

Based on these assessments, it seems clear that the economy of South Africa is currently stronger than Nigeria’s. However, if current developments continue apace, this may not be the situation for much longer.

 

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