|The transport infrastructure in Africa's largest economy is still treading water.|
In April, Africa’s biggest oil producer and most populous nation, Nigeria, rebased its GDP, 24 years after the exercise, which involves replacing the base year used, was first carried out. The results showed the West African nation to be the biggest economy on the continent. The challenge facing Nigeria’s government now is how to raise local capacity to drive inclusive growth.
The new size of the economy has raised the country’s profile as an investment destination, says Standard Bank. “Obviously, the new GDP figures will make it increasingly harder for companies looking at Africa to overlook Nigeria, especially considering the size of the domestic market and its potential, but the main constraints on a sizable turnaround in foreign direct investment will still persist,’’ Samir Gadio and Ayomide Mejabi, research analysts at Standard Bank, London wrote in an emailed note.
According to Gadio and Mejabi, the constraints to higher FDI inflows include persistent energy and infrastructure bottlenecks, weak institutions and governance issues, as well as the slow pace of structural reforms in the country. They added that addressing these shortcomings “will probably have much more impact on investment than the perception that Nigeria is now a bigger economy.’’
With a GDP of $509.9 billion for 2013, Nigeria displaced to second spot the long-standing regional champion South Africa, whose GDP is $384.3 billion. Nigeria now figures as the 26th-largest economy in the world. (In GDP per capita terms, Nigeria at $2,860 is still behind South Africa’s $6,950.)
The recent rebasing showed an increase in Nigeria’s share of services from 29% in 1990, the base year used for the previous exercise, to 52.2% in 2010, the year for the recent rebasing. The fast-growing telecoms and information sector’s share rose to 8.7% from approximately 1%. The agricultural sector’s share fell to 21.9% at current prices from an estimated 34.7% under the previous measure.
With a population of approximately 170 million people, the country faces high unemployment among its youth. Joblessness is blamed in part for rising insecurity.
Nigeria needs to strengthen its infrastructural capacity, especially in areas such as power generation and transportation. Last year the government sold state-owned power assets to attract investment into the sector in a bid to raise power generation from the current level of approximately 4,000 megawatts.