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Nigeria to witness Rapid Economic Growth, says study

McKinsey Global Institute (MGI), has released a study showing that Nigeria and other African countries strong economic growth will continue at a rapid pace. MGI therefore advised that investors and business can not afford to ignore the continent’s potential, which goes far beyond commodities.

The study released on Friday by MGI, the economics research arm of consultancy firm McKinsey, said Africa’s Gross Domestic Products (GDP) grew by 4.9 per cent between 2000 and 2008, making it the third fastest growing region in the world.

National Bureau of Statistics (NBS), in a report recently said Nigeria’s economy grew by N994 .9 billion in the first quarter of this year due largely to increase in crude oil output.

According to data released last week by the agency, nominal Gross Domestic Product (GDP) stood at 6.4 trillion in the first quarter of 2010, compared to N5.4 trillion in the corresponding period of 2009, a growth of 7.23 per cent, compared to 4.50 per cent in the corresponding period of 2009.

Statistician-General of the Federation, Mr. Vincent Akinyosoye, said the non-oil sector also made significant contribution to the economy with 8.15 percent growth in real terms in the first quarter of 2010 compared with 7.90 percent achieved a year ago. There was however a decline from 8.68 recorded in the fourth quarter of 2009.

According to him, “The Real Gross Domestic Product (RGDP) in Nigeria grew by 7.23 per cent in Q1 2010, higher than the growth rate of 4.50 per cent recorded in the corresponding quarter of 2009. The 2.73 per cent increase in RGDP in Q1, 2009 was accounted for by the increase in production in the oil sector of the economy. The Oil sector witnessed increased output in Q1 2010 due to the Amnesty Programme of the Federal Government in the Niger Delta.

“In absolute term, the RGDP stood at N159.20 billion in Q1 2009, compared to N148.7billion in Q1 2009. Oil sector GDP contributed 18 per cent to real GDP in Q1 2010, while non-oil GDP contributed 82 per cent. The nominal GDP (NGDP) stood at N6.40 trillion in Q1 2010, compared to N5.40 billion in Q1 2009.”
In 2008, the continent’s combined GDP was $1.6 trillion and this could increase by a trillion dollars in the next 10 years, reports Bloomberg.com.

“We find that Africa’s economic growth surge was widespread across countries and sectors and that its roots extend far beyond the global commodity boom. Natural resources only directly accounted for 24 per cent of Africa’s combined GDP from 2000 to 2008 and GDP grew at a similar rate in big mineral exporting countries than in countries without resource exports.

While there remain risks to growth in any individual country, our analysis suggests that the continent’s long-term growth prospects are quite strong,” the study said.

The report further stated that, “Future growth will continue to be boosted by global demand for commodities while the continent’s ability to create new types of partnerships with foreign investors and increased access to international capital will also lift growth.

“Africa has a large consumer market which is bound to grow over the coming decade. In 2008, Africa households spent $860 billion — more than households in India or Russia.

“Household spending is projected to increase to $1.4 trillion over the next ten years if the continent’s GDP grows at its current level. The labour market will exceed that of China and India by 2040 and is expected to be over 1.1 billion then. The growing consumer spending will create markets attractive to global corporations.”

MGI predicted that in 2020 the five biggest consumer markets — Alexandria, Cairo, Cape Town, Johannesburg and Lagos — will each see more than $25 billion in household spending. The consumer markets in those cities will be comparable to Mumbai or New Delhi.

“Africa’s business opportunities are potentially very large, particularly for companies in consumer-facing industries, resources, agriculture, and infrastructure,” MGI said.

“The consumer-facing sector, which includes consumer goods, telecoms and banking, is already growing two to three times faster than in countries belonging to the Organisation for Economic Co-operation and Development (OECD).

“Agricultural production in Africa could increase from around $280 billion currently to $880 billion by 2030. If the resources, agriculture and infrastructure sectors were included with the consumer facing sector, annual revenue for those sectors could be worth $2.6 trillion by 2020.

“Global executives and investors cannot afford to ignore Africa’s immense economic potential,” the study said.