South Africa has surpassed Nigeria to become Africa’s largest economy. South Africa regained the position after two years of coming in behind Africa’s biggest oil producer.
The Nigerian currency (naira) has been losing against the dollar while South African money (rand) keeps on making gains against the dollar. The rand gained more than 16 percent against the dollar from the beginning of 2016 and Nigeria’s naira lost more than a third of its value in June when its Central Bank removed a currency peg according to the report by Bloomberg.
South Africa’s economy is currently at $301 billion at the rand’s current exchange rate with the dollar, while Nigeria’s GDP is at $296 billion, based on gross domestic product of 2015 published by the International Monetary Fund.
Declining oil prices, reduced oil output due to insurgency and shortage of foreign currency are among the reasons that caused Nigeria’s economy to shrink by 0.4 percent in three months early this year. For South Africa, decline in farming and mining output caused it economy to reduce by 0.2 percent.
“More than the growth outlook, in the short term the ranking of these economies is likely to be determined by exchange rate movements,” Alan Cameron, an economist at Exotix Partners LLP, said in e-mailed responses to questions on Aug. 2 from Bloomberg.
Although Nigeria is unlikely to be unseated as Africa’s largest economy in the long run, “the momentum that took it there in the first place is now long gone.”
South Africa experienced more economic growth as investors turned their attention to emerging markets as Britain voted to leave the European Union in June. And as South Africa voted for the local government, there were speculations that the pressure against the ruling party will make it introduce economic reforms that will boost growth and cut unemployment.