Within the next few days, Nigeria is expected to announce that it is now the largest economy in Africa, surpassing South Africa. One will need to look carefully at the calculations, but the announcement should come as little surprise. Nigeria is a booming market, and contains nearly one-fourth of the population of Sub-Saharan Africa. Its population is four times that of South Africa and its markets are more open to new investment than is South Africa.
Why Nigeria feels it necessary to recalibrate its economic data may have more to do with internal domestic politics and less to do with South Africa, its rival for leadership of the African continent. President Goodluck Jonathan is under great pressure to show economic results as he approaches a run for re-election, which is expected to be held in the first quarter of 2015, but could come as early as Dec. 2014. Jonathan's advisors may feel that it will be a great achievement if the nation can pass South Africa as the continent's strongest economy. It will certainly be a point of national pride.
However, while it is good to acknowledge the Nigerian market, the data will not reflect more troubling and worrisome facts about today's Nigeria. Despite growing investment, the nation still is only meeting 20 percent of its current electrical power needs. The lack of consistent power resources is the single-most important inhibitor of growth in Nigeria, as well as throughout Africa.
For this reason, Jonathan is also placing highest priority on the development of power facilities throughout the nation, but few if any will be in place by the time of the presidential elections. Nigeria remains, to a considerable extent, a divided nation, of north and south, oil-producing states and non-oil producing states. Boko Haram and related groups remain a threat to the stability of the nation as well.
Most troubling is the gap between rich and poor, although this is not unique to Nigeria, but one painfully obvious throughout the world, as Pope Francis recently and correctly observed. However, it is especially extreme in Nigeria, still one of the world's poorest nations on a per capita basis. While there is purportedly a growing middle class, it is still dwarfed by the millions in poverty, living on less than $2 a day. The massive poverty hangs over the country like the Sword of Damocles, creating primary recruiting grounds of the desperate for the ideologues.
It is important for Africa and the world that Nigeria's economy grows. Nigeria is the giant of West Africa and if it fails as a nation, so too will the region of West Africa, with all its resources and promise. There are many investors going into Nigeria now, especially from China, which is making major investments in construction in Abuja, the capital, as well as elsewhere in the country. One should be grateful for this investment.
Ironically, another major investor in the Nigerian economy is South Africa. South African businesses and banks view Nigeria as a major market for their country's interests and their investment is important to both the economies of South Africa and Nigeria. Politically, this may also have the effect of increased cooperation between the two nations.
There is also increasing investment in Nigeria from some key American companies. General Electric and Symbion Power are making major investments in the development of power plants, both as partner and competitors throughout the country. Procter & Gamble is making a major investment in manufacturing in Nigeria, as is Wal-Mart, and IT giants IBM, Microsoft and Oracle are also becoming more engaged in Nigeria. U.S. oil companies remain in Nigeria and still represent the major part of foreign investment for the country.
For now, it is not really important which country really has the largest economy on the continent. What is far more important is how that economy is going to benefit the whole of the population of Nigeria, and what that will mean to West Africa. As Nigeria goes, so too will West Africa.
Stephen Hayes is president and CEO of the Corporate Council on Africa.