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Average exchange rate tells a different tale of Africa's largest economies - Businessday
The naira traded at an average of N203 in the first half of 2016, and based on the GDP at the end of 2015, published by the National Bureau of Statistics (NBS), the size of Nigeria's economy is $463 billion (N94trn).
This figure places the West African nation's economy well ahead of South Africa's economy valued at $280 billion, as the rand hovered tightly between 15.5 and 13.4 in the last six months, at an average of 14.45.
Previous reports had calculated, based on the spot rate of the Nigerian naira at 320/$ (Wednesday) and South-African rand at 13/$, "but it makes more sense to calculate with an average on account of currency volatility," Tiffany Odugwe, a macro-research analyst at investment firm, Cardinal Stone Partners Limited, said on phone.
The naira weakened 2 percent to N320.25/$ at 3pm in Lagos on Friday, while the rand firmed 0.26 percent to 13.4 at 4:45pm in Johannesburg.
The naira traded at an average of N226 in the month of June and N281/$ in July, before plunging further by 13.8 percent to N320 in the month of August.
Attempts at reviving Nigeria's economy and putting a lid to eroding private capital saw the nation adopt a market driven FX structure on June 20, after 16 months of maintaining a currency peg of N199/$. "The desired impact of the new FX regime should be felt over time, only after autonomous suppliers (other than the oil majors) enter the market," Chinwe Egwim, a macro-research analyst at FBN Quest, said in an emailed response to questions. "There is no exact period that one can point towards (regarding when Nigeria's economy will recover). However, next year is around the corner and the primary drivers would increase the FX inflow from the offshore community as well as from improved oil revenue on the back of a resolution in the Niger Delta (i.e. production boost). Both having a positive effect on the naira. In addition to this, a bounce back in economic activities will be a big factor," according to Egwim.
The International Monetary Fund (IMF) revised growth projections down in sub-Saharan Africa, reflecting challenging macroeconomic conditions in its largest economies, which are adjusting to lower commodity revenues.
In Nigeria, economic activity is now projected to contract 1.8 percent in 2016, as the economy adjusts to foreign currency shortages as a result of lower oil receipts, low power generation and weak investor confidence.
South Africa's economy is projected to remain flat in 2016 as well, with only a modest recovery next year.
Egypt, which has become Africa's second largest economy, sees its pound trade at 8 EGP/$, even as 2015 full year GDP sat at $330.8, according to World Bank data.
The Egyptian pound jumped 0.6 percent to 8.8/$ at 2:30pm in Cairo, Friday, even as its central bank weakened the currency by more than 10 percent in March, the biggest one-time devaluation, after Governor Tarek Amer admitted defending the currency against the dollar was a "grave mistake."
In the course of the year, Nigeria conceded Africa's largest crude producer to Angola, "but Angola's economy is struggling too," FBN Quest analysts assert. "Angola's currency has depreciated by 25 percent in 2016, and it recently turned to the IMF for a bailout." Inflation is over 20 percent y/y and its GDP has slowed down significantly although it is not (yet) contracting. The economic downturn has hit oil dependent countries. However, Angola is not in a better position than Nigeria," FBN Quest analysts told BusinessDay.