Nigeria reclaims ranking as Africa’s largest economy - IMF

Barely three months reporting the displacement of Nigeria by South Africa as Africa’s largest economy, the International Monetary Fund, IMF, yesterday revised itself and affirmed Nigeria as the biggest economy in Africa. This followed its recalculation of the various countries’ Gross Domestic Product, GDP.

According to the Fund’s latest World Economic Outlook for October 2016 estimates, Nigeria’s GDP stood at $415.08bn from the $493.83bn at the end of 2015, while South Africa’s ebbed to $280.36bn from the $314.73bn it attained at the end of last year.

The Fund also predicted that Nigeria’s economy would grow by 0.6 per cent in 2017.

This invariably implies that current efforts to boost economic activities across the broad spectrum have the potential of reversing the current recessionary trend.

In the Breton Woods institution’s report released officially on October 5, Nigeria’s real GDP is expected to increase marginally by 0.6 per cent next year with a projected inflation rate of 17.1 per cent.

However, despite the positive side of the latest report, the country’s Current Account Balance is projected to slump further by 0.4 per cent next year.

Beyond 2017, the Fund projected that global growth would gradually increase by 3.8 per cent in 2021.

It hinged the projected recovery in global activity, which is expected to be driven entirely by emerging market and developing economies, on the normalisation of growth rates in countries like Nigeria, Russia, South Africa, Latin America, and parts of the Middle East.

However, Fitch, one of the world’s reputable rating agencies, estimated that Nigeria’s GDP would peak at 2.6 per cent next year and increased the country’s average CPI forecast for 2016 to 14 per cent from 11 per cent on the basis of government securing financing from multilateral development banks and bilateral sources.

Although the global rating agency had reduced its forecast for the country’s 2016 GDP growth to 1 per cent from 1.5 per cent due to weak performance in the first half of the year, it believes the economy will bounce back in 2017, but with downside risks if dollar liquidity remains tight.

Similarly, the rating agency foresees that dollar liquidity will not improve significantly “until market participants become more comfortable with the sustainability of the exchange-rate level, which is likely to require further narrowing of the spread between the official and parallel market rate”.

IMF, in its World Economic Outlook report, noted that although Egypt’s 2016 data was unavailable, the country’s 2015 size stood $330.15bn, while estimating that of Algeria, one of the largest economies on the continent, at $168.31bn.

It projected global growth to slow to 3.1 per cent in 2016 before recovering to 3.4 per cent in 2017.

The forecast, which revised down by 0.1 percentage point for 2016 and 2017 relative to April, reflects a more subdued outlook for advanced economies following the June Brexit and weaker-than-expected growth in the United States.

It would be recalled that the Fund had, last August, reported Nigeria’s loss of its first position as Africa’s biggest economy to South Africa, following the recalculation of the country’s GDP.

Many analysts faulted the basis of the parameters used by IMF to calculate the GDP then and maintained that its projections were not based on empirical economic indices.

For instance, KPMG Professional Services picked holes in the IMF’s, report on African countries’ GDP in dollar terms, on the grounds that the reported dollar estimates were based on GDP data from the end of 2015, while the exchange rate readings were calculated from August 2016.

KPMG pointed out that IMF’s position that South Africa had overtaken Nigeria as Africa’s largest economy in dollar terms were flawed, saying the calculations behind this assertion are methodologically incorrect.

At the domestic level, a leading research think-tank, the Centre for the Study of the Economies in Africa, CSEA, described the computation as invalid.

In its latest Nigeria Economic Update published on August 12 and made available to National Mirror, CSEA particularly faulted the report on the ground that the single exchange rate figure used for the computation was inappropriate.

National Bureau of Statistics, NBS, also flawed the August GDP report by IMF, forecasting that Nigeria’s economy is likely to shrink by 1.3 per cent in 2016, contrary to the 1.7 per cent predicted by the Fund.

Original Article By: National Mirror