Nigeria and South Africa have both benefited from a recovery in commodity prices since early 2016, though not as much as their main trading partners – China, the United States and the euro zone.
According to Aly-Khan Satchu, CEO of Rich Management in Nairobi, both Nigeria and south Africa have bounced off the bottom, but the sustainability is in question. Nigeria needs a single foreign exchange policy and South Africa needs more policy certainty.
Nigeria, the continent’s most populous country, had been in recession since late 2015 while South Africa confirmed a technical recession in the first quarter of this year. Official growth data are expected early next week for both countries.
A Reuters poll taken last week showed Nigeria’s economy broke out of a long slump in the second quarter with a median forecast for 1.55 percent year-on-year growth while South Africa quit shrinking with 2.2 percent quarter-on-quarter growth.
According to the report, the West African powerhouse, Nigeria, slipped into recession for the first time in more than two decades in August 2016. In the second quarter of 2017, the nation’s Gross Domestic Product (GDP) grew by 0.55% (year-on-year) in real terms, indicating the emergence of the economy from recession after five consecutive quarters of contraction since Q1 2016.
Razia Khan, head of Africa research at Standard Chartered opines that a return to positive year-on-year growth is expected in Nigeria. This will be enhanced by improved foreign exchange availability and a recovery in oil production.
The Nigerian central bank has occasionally taken steps to inject dollars into the market, squeezing the huge difference between black market and official prices, but has not allowed the naira to float.
Still, Nigerian assets which were largely shunned by foreign investors over the past three years have attracted significant amounts of capital after the central bank took further steps in April to liberalise the exchange rate for investors.
In South Africa, the normally reliable trade, catering and accommodation sector was the worst performer in the first quarter, contracting 5.9 percent, while the key manufacturing sector shrank 3.7 percent.
Agriculture is also expected to provide some lift to growth but other sectors are likely to only see negligible growth as confidence lags.