Politics and petroleum have brought down Africa’s two biggest economies, South Africa and Nigeria, as both nations look down the barrel of recession.
Oil giant Nigeria released its quarterly growth figures Wednesday confirming the economy is in recession.
Likewise, the South African economy, the continent’s most established and mature, has seen slowing growth, with a contraction of 1.2 percent in the first quarter, as the population grows faster than the economy. The government is expected to release its second-quarter growth figures next week.
The two nations often see each other as competition. They have in recent years jockeyed for the economic top spot in Africa, with Nigeria recently losing the position to South Africa. But many global investors see them as part of the same Africa package, said Martyn Davies, managing director of emerging markets and Africa at the auditing and consulting firm Deloitte.
“South Africa and Nigeria are the bookends, if you will, of the sub-Saharan economy. One’s misfiring, the other one’s in severe contraction,” he said.
While South Africa’s economy is more sophisticated and established, “Nigeria was undoubtedly the flavor of the decade at least five, six years ago. For South Africa capital – for global capital flowing into Africa – you had to have a Nigeria player, a piece of Nigeria. ... It was too big to ignore.”
Nigeria’s economy has been hit hard by a global slump in oil prices, and further harmed by militant attacks on pipelines in the oil-producing Niger Delta region that have dropped production to about 1.5 million barrels a day from around 2.2 million barrels.
Another problem for Nigeria is a shortage of foreign currency, which means a shortage of imported raw materials for factories and consumer goods for shops. That drives up inflation.