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South Africa overtakes Nigeria as Africa’s biggest economy


South Africa has overtaken Nigeria as
Africa’s biggest economy in dollar terms,
Bloomberg reports.
President Muhammadu Buhari and his South
African counterpart, Jacob Zuma
The change in status of both countries was
attributed to the appreciation of the rand,
South Africa’s currency, and the devaluation
of the Nigerian naira.
Nigerian government through its apex bank -
Central Bank of Nigeria (CBN) recently
introduced a flexible foreign exchange
regime.
Using the Gross Domestic Product (GDP) at
the end of 2015 published by the
International Monetary Fund, Bloomberg
reported that the size of South Africa’s
economy was $301 billion at the rand’s
current exchange rate, while Nigeria’s GDP
was put at $296 billion.
The report stated that the rand has gained
more than 16 per cent against the US
currency since the start of 2016, while in
contrast, Nigeria’s naira has lost more than a
third of its value.
Despite the statistics, both countries are still
at the risk of recession, having contracted in
the first quarter of the year. Nigeria’s
economy shrank by 0.4 per cent, while South
Africa’s GDP contracted by 0.2 per cent.
Two weeks ago, Nigeria’s minister of
finance, Mrs Kemi Adeosun told the Nigerian
Senate that Nigeria is “technically in
recession” after months of insisting that the
economy was doing well.
Nigeria has suffered amid low oil prices
occasioned by the resurgence of militancy in
its oil-rich Niger-Delta region, while South
Africa is sensitive to shifts in the commodity
cycle.
“More than the growth outlook, in the short
term the ranking of these economies is likely
to be determined by exchange rate
movements,” economist Alan Cameron said.
Cameron however stated that Nigeria was
unlikely to be unseated as Africa’s largest
economy in the long run, but added that “the
momentum that took it there in the first place
is now long gone”.
Meanwhile, the Nigerian government has
informed its citizens that it will result to
borrowing to fund the 2016 budget due to
the declining price of oil in the international
market.
The government is already in the the
process of appointing two lead managers
and a financial adviser to organize the
issuance of $1 billion of Eurobonds this year.
According to the Debt Management Office
(DMO), the sale is the first tranche of a $4.5
billion Nigeria Global Medium-Term Notes
Issuance Programme that runs through
2018.

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