Africa: Economic giants now contracting

Both the Nigerian and South African economies contracted in Q1, and the latest activity figures suggest that things remained very grim going into Q2. In Nigeria, disruptions to oil output in Q2 have dealt a heavy blow to an industry that was already suffering as a result of low crude prices. Electricity shortages will have battered the non-oil sector. While the move to a market-determined exchange rate is surely welcome, it will do little to turn the economy around in the short term. In South Africa, output figures suggest that the economy recovered a touch in April after contracting in Q1. But growth remains very weak. And the wide current account deficit will keep pressure on the rand, pushing up inflation and prompting painful rate hikes despite the weakness of the economy.