By Charlie Robertson, Global Chief Economist at Renaissance Capital.
South Africa’s GDP for 2018 was just released which shows it was Africa’s biggest economy in actual dollars (PPP dollars, which show Nigeria was the biggest in 2017 at $1.2 trillion , don’t buy you the imports you need to build an oil refinery – note that PPP dollars are NOT what puts Nigeria’s GDP at $397bn .. the $397bn figure is the exchange rate the IMF used which is different from the NAFEX rate of NGN362/$ we use).
This piece outlines the 2019-23 outlook for Nigeria – as it tries to regain the top spot.
To get real per capita GDP growth up to 4-6% (ie headline GDP growth of 7-9%) requires either
Without it, per capita GDP growth may be around 0% which implies headline GDP rising at roughly 3% annually
To achieve industrialisation, Nigeria needs to
To double the investment rate we suggest that reforms may be needed like
The good news is that President Buhari has already declared his second term will be “tough” – so perhaps he will take his 4m vote victory margin to push through difficult reforms. The cabinet should be in place soon after the new presidential term starts on 29 May – unlike 2015 where it took six months. There should be less of a learning curve than we saw in 2015-17.
The precedent of 2015-19 tells us equity investors will not assume rapid, deep reforms. Even if nationwide progress is hard to achieve, we may see localised success stories, such as in Lagos – which has the biggest adult population of any state in Nigeria, high adult literacy (over 80%) and is now planning to get 3GW of electricity over the next few years (total nationwide distribution is around 4GW).
Lastly – we cross-checked population data against voting data because we doubted our initial estimates that there were 22% more adult voters in Nasarawa state than adults. We ended up agreeing with local and IMF estimates of the population being around 194m in 2018 and perhaps 199m in 2019. We even ended up agreeing with a recent Economist article that the 200 millionth Nigerian may be born in 2019. We can go into more detail on specific voting data for various states if you’re interested in pursuing this.