Yesterday's post by Tim Cocks of Reuters provided a biased analysis of what we otherwise view as a big leap from "poor numbers". Why center the debate on the poor governance, widespread corruption, poor infrastructure, and oil-dependency of Africa's new biggest economy? Why skew the analysis to South Africa-Nigeria's rivalry?
From Tim's conclusion, "By every measure, South Africa has a more sophisticated, developed and diversified economy, with advanced financial markets, while Nigeria relies heavily on oil." I have no doubt he joins those analysts who are quick to confine the revised GDP figures to a buzz that changes nothing to the economic landscape in Nigeria and the continent at large. I am not one of those.
In fact yesterday's news gives several reasons to be proud primarily because after Ghana, the Nigerian's exercise confirms our view that all Frontier African economies are understated and should be quick in rebasing their GDP figures upwards. From Ghana and Nigeria's experiences, we can extrapolate that Middle African; individual economies between Cairo and Cape Town are understated by at least 50%. This is what Ghana did, this is what Nigeria has done and this is what others ought to do with a focus on calculation methods.
The new figures better reflect the structural transformations initiated since the 2000s. Among others, these include stable governments, better policies including public and corporate governance, infrastructure improvements leveraging on increased partnership with China, improved capital markets, better-educated workforce and most importantly mobile phone penetration and its multiplier effect on the economy.
The figure may add nothing to the pockets of Nigerians but it repairs justice. It provides a correction to "Africa's statistical tragedy". The psychological aspect gives a sense of pride to many Nigerians and Afro optimists and this can positively impact confidence and productivity.
From an investments standpoint, this new figure will consolidate Nigeria's balance sheet, which will positively impact borrowing costs, improve per capita income and effect changes of ratios (debt, deficit, tax, market cap etc.) expressed as % of GDP. As mentioned above, this big headline raises awareness on the continuous transformation of Nigeria and Frontier Africa in general thus consolidating the view that Frontier Africa is the next "big thing" for global investors seeking high returns beyond low growth, mature and sometimes highly leveraged emerging markets.
On this note, we re-affirm that the African KINGs led by its king, Nigeria, present the best investment opportunities focusing on the long term.
News from Nigeria is not a buzz but real issue that deserves positive coverage. We have come from far and rebased GDP figures tell us we can go far. Yes we can!
There is no debate and there should be no rivalry between Nigeria and South Africa. South Africa is where it is supposed to be, so is Nigeria.
Therefore, my response to Tim is "by every means, Nigeria is Africa's biggest economy, with unmatched demographic capital and unparalleled investment opportunities beyond the oil sector". It is home to Africa's richest man, whose portfolio is not concentrated in oil and it is home to Nollywood, Africa's most vibrant entertainment industry.
My uptake after yesterday's announcement is the following: Nigeria has been crown king of African KINGs. The story has just begun!
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.