Bloomberg News

Nigeria to Surpass South Africa by 2025, Morgan Stanley Says

June 28, 2011

(Updates with oil output in third paragraph, analyst comment in fourth.)

June 28 (Bloomberg) -- Nigeria’s economy may overtake South Africa’s by 2025 to become the biggest on the continent as oil prices climb and consumer spending in Africa’s most populous nation expands, Morgan Stanley said.

Gross domestic product, which will probably reach $400 billion by the end of the decade, is forecast to increase 8.4 percent in 2011 and 8.5 percent in 2012, Andrea Masia and Michael Kafe, economists at Morgan Stanley in Johannesburg, wrote in an e-mailed report today.

Crude output in Africa’s biggest oil producer is estimated to climb 9.5 percent to 2.3 million barrels a day by 2012 from last year, while oil prices may average $113 a barrel over the next year, Morgan Stanley said. Rising wages and an increase in borrowing is also helping to boost consumer spending in a country of 150 million people, the bank said.

“The sources of output growth are broadening and accelerating, retail trade is vibrant and its financial markets are deepening,” Masia and Kafe wrote. “The economy is on a growth charge.”

Nigeria’s economy is forecast to climb to about $400 billion by 2016 from $268 billion this year, while South Africa’s is expected to reach more than $500 billion from $383 billion in the same period, according to the International Monetary Fund.

Economic Boom

South Africa’s central bank expects economic growth of 3.6 percent in 2011 and 3.9 percent in 2012.

Nigeria’s economic boom may push the market value of the equity index to $1 trillion in five years time from $74 billion currently, Oscar Onyema, chief executive officer of the Nigerian Stock Exchange, said today. South Africa’s bourse has a market value of $494 billion.

Minimum wages in Nigeria more than doubled to 18,000 naira ($114.69) a month before elections in April after remaining unchanged at about 7,500 naira since 2000, Morgan Stanley said. Public-sector wages are budgeted to rise 20 percent in 2011 and 10 percent in 2012, helping to spur consumer spending, it said.

The naira, which may strengthen to 153 against the dollar by year-end and 150 by the end of 2012, “should help to lift consumer confidence and support the retail sector,” Morgan Stanley said. The wholesale and retail trade industry accounted for 19 percent of GDP in 2010, higher than oil, which makes up 15 percent, the bank said.

Morgan Stanley recommends investors buy shares in Guinness Nigeria Plc, Nestle Foods Nigeria Plc, Diamond Bank Plc and Guaranty Trust Bank Plc.

--Editors: Nasreen Seria, Ana Monteiro

To contact the reporter on this story: Maram Mazen in Khartoum at mmazen@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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