According to the report by Bloomberg, South Africa’s economy regained the position of Africa’s largest economy in terms of dollar exchange more than two years after losing it to Nigeria as the value of the nations’ currencies moved in opposite directions.
Recall that Nigeria Became the largest economy 2014 after Rebasing her GDP when authorities in the West African nation overhauled their GDP data for the first time in two decades and since then has enjoyed stable economic growth rate.
However, with the change in government after the incumbent government lost power to the opposition. The economic situation in the country has dropped drastically given the rise of many militants blowing her oil pipeline causing the country to lost so much to the militants.
The fall in oil price in the global market also contributed to a serious decline in her exchange rate among others. And with the removal of the peg of 197-199 naira per dollar by the Central Bank of Nigeria .
Remember that the monetary authority of Nigeria raised its benchmark interest rate to a record in July to lure foreign money and investment in the country. The government also has appointed some financial experts to organize over $1billion bond.
The report by Bloomberg argued that, based on gross domestic product at the end of 2015 published by the International Monetary Fund, the size of South Africa’s economy is $301 billion at the rand’s current exchange rate, while Nigeria’s GDP is $296 billion.
It further argued that the rand gained more than 16 percent against the dollar since the start of 2016, and Nigeria’s naira lost more than a third of its value after the central bank removed a currency peg in June.
Recall, that Bloomberg report in July clearly states that South Africa took over from Egypt to a close match to Nigeria. The report states that Nigeria is still Africa’s number one economy, even after a 30 percent devaluation of the naira last month which knocked almost $150 billion of its gross domestic product when measured in dollar terms.
The report further states that both nations face the risk of a recession after contracting in the first quarter of the year. Recall, that Nigeria finance minister had earlier stated last two weeks that the country is currently experiencing a recession.
The report states that Nigerian economy shrank by 0.4 percent in the three months through March from a year earlier amid low oil prices and output and shortage of foreign currency. That curbed imports, including fuel. On the part of South Africa, GDP contracted by 0.2 percent from a year earlier as farming and mining output declined.
Although the report also emphasises the fact that Nigeria economy is unlikely to be unseated by South Africa in the long-run considering the economic outlook, that exchange rate is likely to determine the growth pattern of both countries.