That
Nigeria now has the largest economy in Africa after rebasing its Gross
Domestic Product will not necessarily pull foreign investment into the
country, the World Bank has said.
Experts from the World Bank said that
policies and profitability were more critical factors in determining the
destination of Foreign Direct Investments.
They spoke during the release of Africa’s
Pulse – an analysis of issues shaping Africa’s economic future through
video conference in Washington, United States on Monday.
The conference which had participation of
journalists from 12 countries in Africa was moderated from Washington.
It was addressed by the Chief Economist, World Bank, Africa Region, Mr.
Francisco Ferreira, and the Lead Economist, World Bank, Africa Region,
Punam Chuhan-Pole.
After rebasing the economy, the Nigerian Bureau of Statistics put the nation’s GDP at $510bn ahead of South Africa’s $370bn.
But the experts said the standard of
living of individuals in a country was also a critical factor in
determining what is happening in the country and not the state of its
GDP alone.
They recommended measures aimed at the
redistribution of income and an intelligent cash transfer to reduce the
income gap in the continent.
This, according to them, is in spite of
the 19 years of steady economic growth on the continent. They said there
was a very urgent need to make Africans feel the direct impact of
wealth that was being produced from the extractive industry which was
responsible for much of the growth.
The World Bank chiefs also suggested
that some other African countries needed to rebase their economies in
order to get a better picture of what was happening on the continent.
Answering questions posed by Nigerian and
South African journalists on the import of Nigeria’s rebased economy
for foreign investment in the two countries, Ferreira said South
Africa should not worry about losing the topmost position to Nigeria as
investors had other things to consider rather than the size of the GDP.
He said, “Let me tell you from the
Brazilian perspective. I am a Brazilian. There are two things we like
very much. We like being large and we like celebrating. So we are also
one of the big economies in the world and we have a big carnival and we
celebrate all these things. Really, what matters in the end is per
capita income. What matters is individual’s living standard.
“I don’t want to rein in Nigeria’s
parade at all but I think it is just great we now have a better sense of
how large that economy is. It is also the most populous country in the
region.
“It is fantastic that we know that but
going forward, what matters is living standard for everyone and the
productivity that generates those living standards.
“For South Africa, I don’t think
investors sitting in New York, London, Beijing or Tokyo are looking at
GDP statistics necessarily.
“They are looking at how they can make
profitable investments in that country. If South Africans want to worry
about things, they can worry about labour situation and strikes. They
can worry about persistent inequality. The fact that Nigeria has a
larger economy is not something I would predict we would worry about if I
were a South African.”
Chuhan-Pole, who authored the Africa’s
Pulse report, echoed a similar thought when she said that the policies,
prospects and investors’ perspectives played more roles in determining
the destination of global FDIs than a nation’s GDP.
She said, “To put it in context; in the
global economy, the FDI is very, very large and net outflow is in the
trillions. Nigeria’s becoming larger; does that mean that investors will
not be able to differentiate each country and see what the prospects
are for them?
“It is not like for Africa; there is a
fixed pull of X billion dollars and now a little more goes to Nigeria
and a little less goes to South Africa. That Nigeria is the largest
economy in Africa and South Africa should get less FDI should not be
much of a concern to South Africa.
“It depends on the merits of the country itself – the policies and prospects and how investors are viewing them.”
The World Bank economists lamented that
the gap between the rich and the poor was growing despite the funds that
the region was making from the extractive industry. They suggested that
intelligent redistribution of income could do the continent some good.
They also expressed worry over the
continent’s poor access to electricity, adding that despite the paucity
of power, Africans pay up to two or three times more than consumers of
electricity in developed countries.
Ferreira said, “The growth is not taking
place where the poor are working; agriculture for instance which employs
up to 60 to 70 per cent of Africans. We must take the wealth Africa is
extracting from the ground and invest in other sectors, including human
capital development.”
In a statement issued at the end of the
video conference, the World Bank said economic growth in sub-Saharan
Africa rose from 4.7 per cent in 2013 to a forecasted 5.2 per cent in
2014.
It said, “This performance is boosted by
rising investment in natural resources and infrastructure, and strong
household spending.
“Growth was notably buoyant in
resource-rich countries, including Sierra Leone and Democratic Republic
of Congo. It remained steady in Cote d’Ivoire, while rebounding in Mali,
supported by improved political stability and security.
Non-resource-rich countries, particularly Ethiopia and Rwanda, also
experienced solid economic growth in 2013.
“Capital flows to sub-Saharan Africa
continued to rise, reaching an estimated 5.3 per cent of regional GDP in
2013, significantly above the developing-country average of 3.9 per
cent in 2013, boosted by new oil and gas discoveries in many countries
including Angola, Mozambique, and Tanzania.”
It added that with lower international
food and fuel prices, and prudent monetary policy, inflation slowed in
the region, growing at an annual rate of 6.3 per cent in 2013, compared
with 10.7 per cent in 2012.
In Port Harcourt, Rivers State, Governor
Rotimi Amaechi described the report that Nigeria’s economy was the
largest in Africa as invalid and unsound.
Amaechi expressed the need for the
Federal Government to juxtapose report with the World Bank’s declaration
at the weekend that Nigeria was among the poorest countries in the
world.
“This declaration is not only invalid, it
is unsound. We are Nigerians and we must tell ourselves the truth.
Nigeria has two sets of people; the extremely rich and the extremely
poor,” he said through his Chief of Staff, Chief Tony Okocha.
He added, “We no longer have the middle
class anymore. Why then do we rate the country as the largest economy in
Africa and the 26th largest economy in the world?”
PUNCH
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