The rebasing of Nigeria’s GDP in 2014 has made it clear that the country has Africa’s largest economy. It has also provided a much-improved picture of the changing make-up of the country’s GDP Components. While the country’s exports are heavily focused on oil, extractive industries make up a much smaller proportion of GDP. This is true across all regions, where overall GDP is far more diversified than exports. Domestic consumption is the most important factor driving overall GDP, and in most regions this is fairly well spread across several sectors.
Many African countries and regions rely heavily on extractive industries for exports. These include Nigeria, Southern Africa, Central Africa and the Maghreb region. Countries with more exposure to extractive industries have done well in the past decade as commodity prices have historically been at high levels, but as prices have fallen in recent times, the opposite side of the reliance on commodities has been exposed. Nigeria’s reliance on oil has been well documented, and is the most obvious example, but many parts of the continent also have significant exposures. The most immediate impact on these economies when commodity prices fall is pressure on the currency, which must find a new demand/supply equilibrium. This is followed by an impact on government revenues, which can have a significant impact on the state’s ability to fund commitments and balance budgets.