Nevertheless, the country’s Minister of Finance, Ngozi Okonjo-Iweala believes that this change is noteworthy as it will have a psychological impact on foreign investors. While this is without a doubt significant for the country, many believe that it won’t replace South Africa as a hub anytime soon.
“In terms of Marketing Nigeria as an investment destination for example, certainly Nigeria steps up into a different league, so from that perspective it is significant,” Michael Lalor, Lead Director of the Africa Business Centre at EY told CNBC Africa
The size of the economy stretched by more than three-quarters to an estimated 510 billion dollars for 2013. According to the rebased figures, the country’s agriculture sector contributed 112.26 billion dollars, the manufacturing sector contributed 34.8 billion dollars, the real estate sector contributed 40.9 billion dollars, telecoms and informations services sector contributed 44.3 billion dollars and crude petroleum and natural gas contributed 73.56 billion dollars.
“Bear in mind that the base year that they were using for their previous calculations was 1990, so you are talking about a big gap since 1990 and some fundamental shifts in the Nigerian economy. The biggest leap has been in the service sector,” Lalor explained.
The structural transformation of the economy led to diversification away from the oil sector resulting in the non-oil sectors as the key drivers of GDP growth. Service sector such as the Telecoms, financial services, FMCG that were not included in the rebasing exercise in 1990 have contributed significantly to the economy over the past years.
“The fact that Nigeria was going to overtake South Africa was widely expected so it’s not been a surprise per se. When you compare both economies, you have to keep in mind that Nigeria still faces large infrastructure challenges,” Samir Gadio, Emerging Markets Strategist at Standard Bank told CNBC Africa.
Gross infrastructure deficit continues to hurt Nigeria as it cuts across all the sectors of the economy and according to experts, more than 14.2 billion dollars is required to fill the infrastructure gap in the country. Thus, South Africa remains ahead in this area.
“In Nigeria, institutions are weaker, in terms of financial sophistication, Nigeria still trails South Africa even though its banks are relatively developed by African standards, so it’s not a given that Nigeria will become the main entry point in Africa,” Gadio concluded.