Nigeria loses largest economy in Africa title to South Africa

August 15, 2016 | Economics & Markets, Nigeria, South Africa

South Africa regains title as naira weakens and oil prices fall

Abuja, Nigeria | – Nigerian President Muhammadu Buhari has acknowledged his country has become poorer since he took office in 2015. The leader made the remarks as Nigeria’s economy is deteriorating due to a fall in oil production and prices.

“It has been a very difficult year for Nigeria. Before we came to office, petroleum sold for about $100 (£77) per barrel. Then it crashed to $37, and now oscillates between $40 and $45 per barrel,” the leader said, according to a statement by the presidential spokesman Femi Adesina.

“Suddenly, we’re a poor country, but commitment to transparency and accountability is not making people know that there is severe shortage.”

Nigeria has been suffering a spate of attacks by the Niger Delta Avengers (NDA) militants, who have vowed to bring the country’s oil production down to zero. The NDA is one of the numerous militant groups in the Niger Delta waging war and attacks against the Nigeria state due to perceived marginalisation of the people in the oil-rich region.

Data and estimates released  by the Nigerian National Petroleum Corporation, NNPC suggested that oil production in Nigeria, Africa’s biggest oil producer, had increased to 1.9million barrels per day which is up from its previous 1.4 million barrels per day.

In May, the Nigerian government announced petrol prices would rise by two-thirds in a bid to remove the controversial oil subsidy. The country’s lack of refineries means it has to export about 90% of its crude oil production and sadly had to import back petroleum products at international prices. The government then sells the imported fuel to Nigerians at subsidised rates and reimburses the difference to importers. This practice led to massive and unprecedented fraud and corruption which has depleted Nigeria’s resources and revenue.

The Buhari government’s move to remove the oil subsidy has angered many, especially the beneficiaries of the cycle with trade and labour unions labelling the decision “criminal” and calling for a strike. However, some analysts believe the decision was a risk worth taking to solve the country’s problems of costly subsidy, fuel shortages, massive fraud and corruption as well as the institutionalised oil theft.

However, President Buhari’s remarks that Nigeria ‘has become poor’ came as South Africa regained the title of Africa’s largest economy, a position held by Nigeria for the past two years.

South Africa’s rand has regained strength against the dollar. On the other hand, the Nigerian naira has weakened after the country removed its currency peg against the dollar in June.

However, some economists have warned both countries could be on the brink of recession. South Africa’s GDP is $301billion, while Nigeria’s is $296billion as per data by the International Monetary Fund.