Nigeria’s booming telecoms sector has helped cement the West African nation’s status as Africa's largest economy.

On Sunday it was announced that Nigeria had overtaken South Africa to become the largest economy on the continent and 26th largest economy in the world with a gross domestic product (GDP) of almost $509 billion for 2013.

Nigeria's current financial status follows a rebasing exercise of its GDP to include sectors such as telecoms and financial services.

It was reported by Nigeria's National Bureau of Statistics (NBS) that the country's GDP was recalculated based on production patterns in 2010, and increasing the number of industries it measures to 46 from 33. The last time Nigeria rebased its GDP was in 1990.

And according to statistics from the NBS, Nigeria’s telecoms sector moved from 0.8% of GDP to 8.6%.

Africa Analysis managing director, Dobek Pater, has told ITWeb Africa that the Nigerian government has long been talking about including the telecoms sector as an official part of the economy.

Nigeria’s telecoms sector is valued at $19 billion and that makes it a significant contributor to that economy, Pater said.

“Nigeria’s telecoms industry grew from a small base and before the arrival of GSM operators in the early 90s the telecoms and IT sectors were very small,” he explained.

According to the country’s regulating authority, the Nigerian Communication Commission (NCC), Nigeria had 121.8 million total active telecom subscribers at the end of October 2013.

And with a 170 million strong population, Africa's top oil producer has close to almost 70% mobile penetration with further room for growth.

“The addressable market has been penetrated but as the country grows and disposable income market grows this will result in more subscriptions,” Pater stated.

He also explained that based on the country’s population size, the economy has potential to grow.

It is currently growing between 5% and 7% growth a year, which is fairly good but the country could reach a growth rate of 10%, said Pater.

However, challenges such as infrastructure for the telecoms sector have the potential to inhibit growth prospects.

“The same as everywhere else in African - Nigeria’s telecoms sector faces many complications,” Pater told ITWeb Africa.

“Issues such as power supply, levies that have to be paid to various entities, ransom protection money, etc. All these contribute to complications and quality of services that telcos’ need to develop,” he added.

Looking ahead; however, Pater noted that there is space for further growth in Nigeria’s telecoms sector especially within the data and managed services space.

“I foresee growth within the small-medium enterprises (SME) market.

“SME’s will look to expand their use of ICT services, shifting from voice to data and managed services in the next five to ten years or so,” he concluded.