The International Monetary Fund (IMF) 2020 World Economic Outlook rating has ranked Nigeria as the number one country in Africa, based on the country’s GDP. Nigeria is 26th in the world with an average of 442,976 million U.S. dollars.
Gross domestic product has been the ultimate measure of an economy’s welfare for over 80 years. This is one of the methods employed to evaluate a country’s economy. The figure is obtained by calculating the total worth of everything produced in a country. This includes all companies and individuals irrespective of their background. The GDP per capita divides a country’s total revenue by the number of people living there. This helps to calculate individual standards of living in the country. The calculation is made based on market or government official exchange rates.
However, it should be noted that Nominal GDP does not consider differences in the cost of living in various countries. The results can change over the years depending on fluctuations in the exchange rates of the country’s currency. Many times, they make almost no difference in the country’s standard of living.
Projections reveal that Nigeria’s economy will continue to grow faster than that of South Africa, the only country positioned to rattle her in this area. According to the World Bank, Nigeria’s GDP overtook South Africa over a decade ago. While Nigeria’s economy was valued at $397 bn in 2019, South Africa had a GDP of $366 bn. Nigeria’s Gross Domestic Product (GDP) at a basic constant price (real GDP) grew by 2.27 percent year-on-year (YoY) from N69.80 trillion in 2018 to N71.39 trillion in 2019 compared to 1.91 percent in 2018.
The growth resulted from the contributions in the agricultural sector (N10.50 trillion), trade sector (N5.94 trillion), and the information and communication sector (N4.66 trillion) with 25.2 percent, 16 percent, and 13 percent shares of the total GDP respectively in 2019.
Comparison of economic size, however, cannot fully incorporate all of the factors that make for a country’s performance. Most GDP’s are calculated based on the price of products in the market using local currency. Also, measuring the economic performance of different countries using a common currency comes with its challenges.
Both Nigeria and South Africa share a lot of collective similarities. The two countries make up almost half of Sub-Saharan Africa’s gross domestic product. Both countries have also experienced a decline in the growth rate over the years.
Nigeria’s economic growth exceeded forecasts in the fourth quarter. This assisted in the expansion of the economy in 2019. Oil output increased and the central bank took steps to boost credit growth. GDP in the West African country amounted to $476 billion or $402 billion, depending on the rate used. South Africa’s economy went the other way. It slumped into a second recession in consecutive years, contracting more than projected in the fourth quarter. Power cuts weighed on output and business confidence. For the full year, expansion was 0.2%, the least since the global financial crisis, and even less than the central bank and government estimated. Based on the average rand-dollar exchange rate of 14.43 for the year, GDP was $352 billion.
According to the IMF report, it seems the country is rising back to growth in 2021 with the recovery in demand at home and abroad. The economic output of Lagos is said to be larger than that of Kenya. This upgrade has also been made possible through the Federal Government’s creation of several policies to enhance the economy by addressing various sectors that directly impacts the lives of citizens.
The Economic Recovery Growth Plan (ERGP) was one of the initiatives by the government to help rid major challenges to economic development in the country. The initiative was to look into the areas that impede growth in the country, taking advantage of the private sector, and improving national cohesion and social inclusion.
FocusEconomics panelists have predicted Nigeria’s GDP growth in 2021 at 1.9% followed by a rise to 2.9% in 2022. There is still quite an uncertainty in the area of oil price trajectory, rising inflation, elevated unemployment, security challenges, and social tensions.
In most countries of the world, GDPs fluctuate with the phases of diverse economic cycles, against a backdrop of long term economic growth over time. Nigeria rose from 46th place to 26th. As a result of the COVID-19 pandemic, economies across the world had suffered huge declines in GDP. Many economies have begun to recover in the third quarter of 2020. Others have not yet recovered to pre-pandemic GDP levels.
The Nigerian economy has been categorized into four main sectors: First, the real sector which comprises all the producing and consuming units of an economy. Second, the external sector which accounts for the transactions of the economy (consume or provide) with the rest of the world. The third is the government sector, that is, the public sector (central governments, the local governments, public corporations) which takes from the rest of the economy. Fourth, the monetary sector, that is, the deposit-taking institutions (banks).
To grow productivity given that these sectors do not work in isolation but largely influence the other, there is a need to create or enhance policies. The policies should also look into the area of stability in the economic sector over time. This will help maintain and enhance the standards already attained as Nigeria is endowed with bountiful opportunities that can further boost and transform her economy.