Continent catches a cold when Nigeria and SA sneeze

Economic and political developments in Nigeria and South Africa will continue to have a direct impact on the other countries in the region, according to International Monetary Fund (IMF) African Department senior economist Cheikh Gueye. The two countries account for 50% of sub- Saharan Africa’s GDP, and their growth (or otherwise) will determine the demand for shipping, transport and associated services across the region. “On the investment side, we have noticed that South African companies are investing in the rest of Africa, and this has an impact in shaping trade flows,” he said in an interview with IMF Survey Magazine. “Third, there are linkages in the financial system. Since 2005, Nigerian banks have extended their operation in many countries in sub- Saharan Africa. That is also true of South African banks.” There are almost 44 subsidiaries of Nigerian banks in about 32 countries, and any banking crisis in Nigeria will have a knock-on effect, he says. South Africa’s direct influence on its neighbours is through the South African Customs Union. A decline in imports to South Africa will see a drop in revenue to the other members of the union in terms of the customs revenue sharing formula. In the case of Nigeria, the IMF estimates that a 3% increase in inflation in Nigeria may have an impact of around 1% on neighbouring countries.