Business
Nigeria set to be Africa’s largest economy
JOHANNESBURG – South Africa could soon lose its status as Africa’s biggest economy to Nigeria, but in the race to be the continental powerhouse, being biggest may not be everything.
Nigeria, Africa’s top oil producer, will complete a rebasing of its gross domestic product (GDP) by next month, its statistics office says, which economists estimate could expand the size of its economy by between 20 and 60 percent.
This exercise, which has missed a string of previous deadlines, looks set to transform Nigeria into the continent’s most important economy measured in terms of GDP size.
With a current economic output of around $290 billion, the West African country – whose population is more than three times the size of South Africa’s 51 million – already boasts faster growth.
While it has expanded by an average of seven percent annually over the past decade, South Africa has averaged three percent growth, held back by rigid employment laws and recurring labour unrest.
But even if it slips from the top spot, South Africa can still claim the crown of being the more diversified and sophisticated economy. Its financial markets are among the world’s most advanced and while its $350 billion economy is smaller than Mexico and Indonesia, its stock market is larger.
For Nigeria, the aim of the rebasing exercise is to change the base year for calculating output to 2008 from 1990 to reflect sectors of the economy that have since grown in importance, such as telecoms and IT.
However, it is still heavily reliant on oil exports, accounting for some 80 percent of government revenue, and an enlarged GDP will do little to immediately improve life for nearly 100 million of its citizens who live on less than $1 a day.
While agriculture and power sector reforms would improve Nigeria’s fortunes, turbulent politics and a resilient and bloody Boko Haram insurgency in its north take some of the shine off its positive growth story.
Whenever it happens, Nigeria overtaking South Africa as Africa’s economic top dog is “kind of everything and nothing,” said David Cowan, Citigroup’s Africa economist.
“It is everything because you are then the largest economy in Africa so there’s a lot of kudos attached to that. But the reality remains that, on the ground, for every Nigerian there’s no difference … South Africa can still call itself the most sophisticated economy in Africa.”
South Africa’s expected retreat in the GDP ranking will nevertheless be a big psychological adjustment for a country that has often taken its lead position for granted.
It may also have geopolitical implications, raising questions about whether South Africa should be the sole African representative in the G20 and the Brics group of the most powerful emerging economies, alongside Brazil, Russia, India and China.
Nigeria has been included in the freshly coined Mint group of emerging economic giants, along with Mexico, Indonesia and Turkey.
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Michael Power, investment strategist at Investec Asset Management, likens South Africa’s situation to that of the United States, whose economic power is expected to be superseded by faster-growing and more populous China eventually.
“Just as the United States is contemplating the prospect of what it’s going to be like to be number two in the world, South Africa (will) have to contemplate what it’s going to be like to be number two in Africa,” he said.
The rise of Nigeria has taken many South Africans by surprise, said Kevin Lings, chief economist at Stanlib, as the country, burdened with an image of corruption and violence, is often portrayed negatively in the media.
“Every time I’ve raised this discussion in the last year, that it looks inevitable that Nigeria will become Africa’s biggest (economy), most audiences are shocked,” he said.
“People have had a certain mindset about the role of South Africa. They haven’t updated that in terms of more recent developments.”
The GDP rebasing is likely to enhance Nigeria’s appeal to investors looking for high growth and alternative markets, while South Africa, with its anaemic economy and faltering currency may appear less compelling, analysts say.
“South Africa’s good infrastructure and sophisticated services industries provide a much easier business environment for investors than Nigeria, but relatively low growth rates, market size and saturation are areas of concern that may turn investment to Nigeria,” said Dianna Games, chief executive of business advisory Africa @ Work.
Still, Simon Freemantle, a senior analyst at Standard Bank, believes multinationals looking for a base from which to expand into the continent will continue to choose South Africa given its effective financial and legal systems.
For investors who may need to seek redress when things go wrong, its enduring, more independent and transparent institutions are a plus.
Decades from now, the gap in size between the two economies will be even wider. By 2050, Nigeria’s GDP will be just under $6 trillion in today’s money as its population heads towards 400 million, predicts Charles Robertson of Renaissance Capital.
South Africa, by contrast, would have 57 million people and a $1.5 trillion economy.
Yet that would give Nigeria a per capita GDP of about $15,000, to South Africa’s $27,000, underscoring the huge development challenges faced by the former.
“Even with the very good trajectory that we see for Nigeria it’s going to take a long time for 170 million people to benefit from this,” said Robertson. “It’s the same in China. You’ve still got hundreds of millions earning virtually nothing and that’s after an extraordinary 30 years.”
– EYE WITNESS NEWS
Nigeria recorded the largest increase in the number of people experiencing multidimensional poverty among five countries that registered increases over their latest measurement periods, according to the United Nations Development Programme (UNDP).
The finding was contained in the 2026 Global Multidimensional Poverty Index report, released on Monday by the UNDP and the Oxford Poverty and Human Development Initiative (OPHI).
According to the report, Nigeria’s multidimensional poverty rate rose from 33 per cent in 2021 to 38.7 per cent in 2024, representing an increase of 5.7 percentage points.
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The number of Nigerians living in multidimensional poverty increased from 72.2 million in 2021 to 90.1 million in 2024, leaving an additional 17.9 million people affected.
The report noted that the latest increase reversed the progress Nigeria recorded between 2018 and 2021, when the proportion of people living in multidimensional poverty declined.
Nigeria’s Multidimensional Poverty Index value also increased from 0.175 in 2021 to 0.208 in 2024, reflecting a rise in both the incidence and intensity of deprivation.
The intensity of deprivation among multidimensionally poor Nigerians increased from 52.9 per cent to 53.6 per cent over the same period.
Unlike income-based poverty measures, which assess poverty based on how much people earn or spend, the Multidimensional Poverty Index examines overlapping disadvantages experienced in daily life.
The index measures deprivation across three dimensions: health, education and standard of living.
Its 10 indicators include nutrition, child mortality, years of schooling, school attendance, cooking fuel, sanitation, drinking water, electricity, housing and household assets.
A person is classified as multidimensionally poor when their household experiences deprivation in at least one-third of the weighted indicators.
The report showed that Nigeria had made progress in reducing multidimensional poverty before the latest increase.
The country’s index value declined from 0.230 in 2013 to 0.202 in 2018 and 0.175 in 2021 before rising to 0.208 in 2024.
Similarly, the proportion of Nigerians living in multidimensional poverty fell from 42.3 per cent in 2013 to 37.2 per cent in 2018 and 33 per cent in 2021 before increasing to 38.7 per cent in 2024.
The number of affected Nigerians also declined from 76.3 million in 2018 to 72.2 million in 2021 before climbing to 90.1 million in 2024.
The report further highlighted significant differences in multidimensional poverty across Nigeria’s subnational regions, with incidence ranging from 3.7 per cent to 88.3 per cent across the regions covered by the analysis.
It compared Yobe and Sokoto, two of Nigeria’s poorest subnational regions with similar Multidimensional Poverty Index values, to illustrate how the forms of deprivation experienced by communities can differ despite comparable overall poverty levels.
Globally, the report estimated that 1.2 billion people across 108 countries lived in acute multidimensional poverty.
Sub-Saharan Africa accounted for 616 million people living in multidimensional poverty, while South Asia followed with 393 million.
The report also found that 83.3 per cent of the world’s multidimensionally poor population, equivalent to approximately 998 million people, lived in rural areas, compared with 200 million in urban areas.
Children below the age of 18 accounted for 617 million, or 51.5 per cent, of the world’s multidimensionally poor population.
In sub-Saharan Africa, 355 million children lived in multidimensional poverty, accounting for 57.7 per cent of the region’s poor population.
In a bold move to deepen retail participation in Nigeria’s capital market, the Aliko Dangote Foundation (ADF) has unveiled a share grant initiative aimed at helping up to five million tertiary students and two million vulnerable women become shareholders in Dangote Petroleum Refinery and Petrochemicals (DPRP) through its Initial Public Offering (IPO).
Managing Director and Chief Executive Officer of ADF, Zouera Youssoufou, disclosed that the Foundation will match qualifying share subscriptions by eligible beneficiaries. Under the programme, students who subscribe for the minimum 10 shares worth N5,250 will receive an additional 10 shares funded by the Foundation, subject to the approved process and allocation, effectively doubling their holdings to 20 shares.
Speaking during a television interview, Youssoufou said the initiative was designed to turn the refinery’s “People’s IPO” vision into reality by giving traditionally underserved groups a direct stake in one of Africa’s largest industrial assets.
“When Aliko announced the IPO, he described it as the IPO of the people and wanted as many Nigerians as possible to participate,” she said.
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According to her, students and vulnerable women were specifically selected because they have historically been underrepresented in the capital market.
The ADF said it is prepared to support up to five million students enrolled in Nigerian tertiary institutions, including universities, polytechnics and colleges of education. Eligible applicants must be at least 18 years old and enrolled in a recognised institution. The Foundation is working with relevant educational authorities to verify beneficiaries.
Youssoufou revealed that about N25 billion has been earmarked for the student component of the scheme, while the broader programme for students and vulnerable women is valued at approximately N40 billion.
She emphasised that the intervention is a grant, not an investment, with all shares ultimately belonging to the beneficiaries.
“The shares end up with the beneficiary. Our goal is to help people who may never have had the opportunity to own shares begin building long-term wealth,” she said.
Beyond students, ADF plans to support up to two million vulnerable women, including widows, women living in extreme poverty, persons with disabilities, and widows of members of the Armed Forces. The Foundation is partnering with state governments, the Ministry of Women Affairs, the Armed Forces and other institutions to identify eligible participants.
According to Youssoufou, the initiative is not only about widening ownership in the refinery but also about promoting financial literacy, encouraging a culture of savings and investment, and helping Nigerians build sustainable wealth through participation in the capital market.
Nigeria’s efforts to increase production and curb crude oil theft still leaves her short of meeting the demands of the 700,000 barrels demand of the Dangote Petroleum Refinery and Petrochemicals (DPRP).
Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, made the disclosure during an interview on Channels Television’s Politics Today at the weekend.
The disclosure comes amid renewed debate over government intervention in the petroleum market, with proposals for production subsidies, the 30-days petrol discount and other measures to support domestic refining and reduce the cost of petroleum products.
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He explained that Nigeria’s total crude oil production does not translate into an equivalent volume available for allocation by the government.
Oyedele said Nigeria’s crude oil production of about 1.8 million barrels per day was shared among parties operating under production-sharing contracts and joint ventures, while production costs, royalties and other obligations further reduced the volume available to the government.
“Under the production-sharing contract and joint venture, they share these things, and the ratios vary. Let’s say roughly 45:55,” he said.
He explained that oil producers first recover eligible production costs through cost oil, while royalties and contractual sharing arrangements also determine the quantity ultimately accruing to the government.
“The long and short of what I’m telling you is whatever is left for Nigeria, we exhaust it almost entirely because of fuel subsidy,” he said.
According to the minister, the situation was particularly severe before President Bola Tinubu introduced the economic reforms in May 2023, when the Nigerian National Petroleum Company Limited (NNPC Ltd), which holds the country’s crude on its behalf, had less than 100,000 barrels of freely available crude remaining.
He said the government had exhausted much of its revenue and resorted to printing money before turning to future crude oil production to secure commitments used to finance present consumption.
“That was a ticking time bomb,” Oyedele said, describing the arrangement under which future oil production was committed to support current fuel consumption.
The minister, however, acknowledged improvements following increased production, efforts to reduce crude oil theft and the renegotiation of some existing commitments that had tied down the country’s crude.
He cited comments by business leader Tony Elumelu, who had previously expressed frustration over the scale of crude oil theft in Nigeria, and subsequently reported an improvement in the situation.
Despite these gains, Oyedele said the country was yet to attain the level of freely available crude required to supply the Dangote refinery with its full daily requirement.
“But we are still not at the point where we can give Dangote 700,000 barrels,” he said.
The minister dismissed proposals for the government to supply the refinery with discounted crude or at production cost, arguing that such proposals failed to recognise the constraints on the volume of oil available for allocation.
“We don’t have enough to service Dangote. Dangote imports crude,” he said.
He added that the naira-for-crude arrangement introduced by the Federal Government had helped provide some stability but had not eliminated the supply constraints.
According to him, sustained increases in crude oil production and the release of additional barrels from existing commitments would eventually enable Nigeria to meet the requirements of Dangote and other domestic refiners.
“As we ramp up production and we free up some barrels, we’ll get to a point where we’ll be able to give Dangote everything he wants and other refiners will be able to get enough,” he said.
Oyedele also expressed hope that Nigeria would eventually refine all the crude oil it produces domestically and export refined petroleum products rather than crude.
The disclosure comes amid renewed debate over government intervention in the petroleum market, with proposals for production subsidies and other measures to support domestic refining and reduce the cost of petroleum products.
Oyedele further maintained that achieving that ambition will depend not only on the expansion of refining capacity but also on sustained growth in crude oil production and the availability of additional volumes for domestic processing.
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