Nigeria is Africa’s largest economy with much potential to blossom but its current economic state looks dicey. The new administration led by President Bola Tinubu faces a herculean task to pay off debt and resuscitate the economy.
TechEconomy obtained a recent report by McKinsey titled ‘Reimagining economic growth in Africa: Turning Diversity into Opportunity’ which highlights the significant role Nigeria, Egypt, and South Africa play in slowing down Africa’s Gross Domestic Product (GDP) growth.
According to the report, these three countries are responsible for 65 percent of Africa’s GDP slowdown. It further emphasizes that if these countries had maintained their growth rates from 2000 to 2010, Africa’s GDP in 2019 would have reached $3 trillion instead of $2.6 trillion.
The report sheds light on the economic performance of Africa, a continent known for its young and rapidly growing population.
Despite having immense potential, Africa’s GDP per capita has only grown by an average of one percent annually since 1990, significantly lagging behind countries like India and China, which have experienced higher growth rates.
GDP Figures
Additionally, the report highlights a noticeable deceleration in continental GDP growth from 2010 to 2019, following a period of acceleration from 2000 to 2010.
Nigeria, along with 12 other African countries, holds 37 percent of the continent’s population and accounted for 46 percent of its GDP in 2019. The sluggish economic growth in these countries over the past decade has had a considerable impact on the overall economic performance of Africa.
The report states that the growth in these countries did not keep pace with population growth, resulting in increased poverty levels. It further notes that per capita consumption growth was stagnant, growing at an average rate of only 0.8 percent per year.
Among the three countries, Nigeria’s economic decline has had the most significant effect on Africa’s overall GDP slowdown. The country’s service sector alone is responsible for 30 percent of the continent’s economic deceleration.
The average annual growth rate of Nigeria’s service sector dropped from 11 percent in the 2000-2010 decade to just three percent from 2010 to 2019. This decline is primarily attributed to a decrease in trade, particularly consumer spending on goods, which experienced a significant slowdown.
Other service sectors like real estate and information and communications technology (ICT) also witnessed a notable deceleration during the same period.
Addressing the Challenges
The findings of the McKinsey report underscore the importance of addressing the challenges faced by Nigeria, Egypt, and South Africa to achieve sustained and inclusive economic growth in Africa.
It highlights the need for these countries to focus on policies and strategies that promote trade, consumer spending, and diversification of their economies. By revitalizing these key economies, Africa can unlock its full economic potential and create opportunities for its growing population.
Furthermore, the report emphasizes the significance of addressing poverty and income inequality within these countries. It suggests that targeted measures should be implemented to uplift the living standards of the population, particularly in areas affected by economic slowdowns. Such efforts could contribute to increased consumption, stimulating economic growth, and reducing poverty levels.
Conclusion
The McKinsey report draws attention to the critical role played by Nigeria, Egypt, and South Africa in Africa’s GDP slowdown. It underscores the need for concerted efforts to revitalize these economies, promote inclusive growth, and address the challenges hindering their progress. By focusing on these areas, Africa
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