South Africa Set to Overtake Nigeria as Africa’s Largest Economy

In a recent report from the International Monetary Fund (IMF), it has been projected that South Africa will briefly surpass Nigeria as Africa’s largest economy in 2024, a noteworthy shift in the economic dynamics of the continent. This forecast, outlined in the IMF’s World Economic Outlook, anticipates that South Africa’s gross domestic product (GDP) will reach an estimated $401 billion by 2024, at current prices.

This projected GDP figure would momentarily exceed Nigeria’s GDP, which is estimated to be around $395 billion, as well as Egypt’s GDP, standing at $358 billion during the same period. This development signifies a significant change in the economic pecking order on the African continent.

South Africa, often regarded as the most industrialized nation in Africa, is poised to claim the top economic position for just one year, as the report suggests. Subsequently, South Africa is expected to fall behind Nigeria once again, regaining its status as the continent’s largest economy, albeit temporarily, in 2024. However, South Africa is further projected to slip to the third position by 2026, with Egypt taking the second spot, according to the IMF’s analysis.

The IMF’s forecast for South Africa’s economic growth shows that it is expected to expand by 0.9% in the current year, with a more robust growth rate of 1.8% expected by 2024. This projection is based on the assumption that South Africa successfully addresses key challenges, such as power supply issues, resolves logistical bottlenecks, and implements necessary economic reforms. The South African economy has the potential for even faster growth, ranging from 2.5% to 3%, should these obstacles be effectively surmounted.

In contrast, Nigeria is experiencing a slowdown in economic growth, with an expected growth rate of 2.9% in 2023, down from the 3.3% recorded in the previous year. The IMF attributes this deceleration to the impact of persistently high inflation, which has remained in the double digits since 2016, currently standing at a concerning 26.72%.

In the domestic realm, President Tinubu has introduced a wide range of policy reforms since assuming office, which have garnered international approval. However, these reforms have had mixed effects domestically. While they have been lauded on the international stage, they have simultaneously caused hardships for Nigerians. The Nigerian currency, the naira, has depreciated by almost 50% in value, and the cost of fuel has surged by over 200%, placing a significant strain on the average citizen.

This projection comes after Nigeria initially overtook South Africa as the largest economy on the continent in 2014, following a comprehensive rebasing of its GDP. This rebasing exercise resulted in a near doubling of Nigeria’s GDP, propelling it to just over $500 billion and securing its place as the 26th largest economy in the world at the time.

However, it is essential to acknowledge that both South Africa and Nigeria have been grappling with a host of internal economic challenges in recent years. While South Africa’s struggles with electricity supply are more recent, Nigeria has been plagued by chronic power supply issues that have defied lasting solutions. Additionally, both nations face the significant issue of unemployment, with different methodologies yielding varying unemployment rates. Nigeria’s unemployment rate, according to the new methodology, stands at 4.1%, while South Africa faces a staggering unemployment rate of almost 33%, with youth unemployment at a disconcerting 62% among 15- to 24-year-olds.

Moreover, Nigeria faces considerable difficulties in meeting its OPEC oil production quota, which is crucial for its foreign exchange earnings. The country has struggled to comply with its production targets for months, mainly due to the persistent problem of crude oil theft in the Niger Delta region, a situation that continues to hinder the country’s economic prospects and stability.

In light of these developments and economic challenges, the potential shift in the ranking of South Africa as Africa’s largest economy is a significant development, reflecting a dynamic economic landscape on the continent. The IMF’s projections indicate that economic conditions in these two African powerhouses remain intricate and subject to change, depending on how they address their respective economic challenges.