Once the largest economy in Africa after its GDP was recalibrated in 2014, Nigeria has now fallen to the fourth position, trailing behind South Africa, Egypt, and Algeria.
Back in 2014, Nigeria's economy was valued at $510 billion, but by 2024, it has dropped to $199.7 billion, as reported by the International Monetary Fund (IMF).
“Nigeria’s GDP at $195 billion has declined over the last decade losing over $300 billion in value due to devaluation, low productivity, and stagflation,” CFG Advisory, a Lagos-based research and advisory firm, stated in its report titled, ‘From Reform Fatigue Quagmire to Sustainable Growth.’
“The country is no longer the largest economy in Africa, ranking fourth behind South Africa, Egypt, and Algeria. This is owing to the prolonged policy inconsistency since the economy came out of the post-COVID recession,” it stated.
Adeola Adenikinju, President of the Nigerian Economic Society, stated that Nigeria must reclaim its position as an African economic powerhouse through economic diversification and enhanced productivity.
“Rebasing will lead to a significant increase in the value of GDP because new sectors will be added, hence GDP will be higher than what it presently depicts. However, in the long term, Nigeria will have to find a way to improve the economy and diversify productivity,” he said.
Nigeria's GDP growth, while positive in naira, has experienced a decline when measured in US dollars due to currency devaluation.
“Exchange rate has reduced significantly in the last two years, contributing to the decline in GDP measured in dollar terms. In real terms, Naira GDP has grown albeit at a very slow rate,” Adenikinju stated.
Nigeria is progressing with its economic rebasing; however, analysts suggest that this may not result in the country becoming Africa's largest economy.
Muda Yusuf, Director and CEO of the Centre for the Promotion of Private Enterprise, attributes Nigeria's $300 billion GDP reduction to exchange rate depreciation, causing a contraction in the dollar value of its GDP.
“The main reason for the decline is the exchange rate depreciation and that is in dollar terms. If we are using a lower exchange rate like it was before, then our GDP would have increased. However, with the depreciation in the exchange rate, converting GDP Naira value to dollars will significantly lead to a major contraction in GDP value,” he said.
“Nigeria’s economic activities have not contracted that much and GDP growth has been positive, apart from the COVID period where we recorded a negative,” he noted.
He indicated that the rebasing of GDP will encompass a broader range of sectors that have expanded over the past decade, suggesting that the country is likely to report a significantly higher GDP, even when measured in dollar terms.
For Nigeria to reclaim its status as Africa’s largest economy, Yusuf emphasized the necessity for economic growth, the elimination of existing barriers, and the resolution of challenges that hinder productivity and investment.
“The focus on policy should be on improving productivity, growing investment, increasing export and improving the regulatory environment and the level of infrastructure which are the things that need to be done to bring Nigeria back to being Africa’s largest economy,” he remarked.
CFG Advisory noted in its report that the current efforts to rebase GDP and CPI may not achieve the intended outcomes.
“To get the economy back on track, the government must reduce its debt burden, restore its credit rating to investment grade, and tame inflation.
“This would reduce borrowing costs and provide a stimulus for investment, sustainable growth, productivity, and employment,” it said, stating that to accomplish this, the government must restructure its capital structure and balance sheet.
“Selling down its JV oil assets will raise $30-50 billion, which can be applied to reduce the debt burden, improve the foreign exchange regime, provide dollar supply for naira appreciation, restore credit rating and boost net reserves,” it said.
The naira has experienced a decade-long devaluation.
In 2014, when the last rebasing occurred, the naira was valued between 168/$ and 199/$. As of Tuesday, it had plummeted to 1,549.65/$, indicating a 16-fold depreciation since 2014, and it was ranked among the world’s weakest currencies in 2024.
“By August 2024, the Ethiopian birr, Nigerian naira, and South Sudanese pound were among the worst performers in the region. The Nigerian naira continued losing value, with a year-to-date depreciation of about 43 per cent as of end-August,” a World Bank report said in August 2024.
The outlook for the naira appears more promising in 2025, primarily due to the commencement of new refineries and the issuance of dollar bonds in 2024.
Uche Uwaleke, the director of the Institute of Capital Market Studies at Nasarawa State University, stated, “With increased domestic refining capacity, we expect a significant decline in fuel imports, which will ease pressure on foreign exchange demand and strengthen the naira.”
Razia Khan, managing director and chief economist for Africa and the Middle East at Standard Chartered Bank, noted that the parliament's endorsement of $2.21 billion in external borrowing through Eurobond and sukuk issuance could enhance foreign exchange reserves, thereby boosting confidence in the stability of the foreign exchange market.