By Ntakobong Otongaran
For three days, a conclave of some sort took place in the Russian city of Kazan.
Leaders of the Global South gathered for the 2024 BRICS Summit of emerging economies to determine the future direction of the economies of developing countries.
The theme of this year’s summit is the delinking of the economies of developing countries from the dollar-dominated financial system controlled by the West.
The reasoning behind this agenda is the fear of economic disruptions from sanctions that may be imposed on member nations as seen in Russia and Iran.
How will a multi-polar economic system impact the Nigerian economy?
The BRICS nations and why they matter
BRICS, which stands for Brazil, Russia, India, China and South Africa, started in 2006 when the first four countries in this line up came together to form the ‘BRIC’ group. In 2010, South Africa joined to make it ‘BRICS’.
The group was designed to bring together major emerging economies to challenge the political and economic power of the wealthier nations of North America and Western Europe.
Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates (UAE) were invited to become members effective 1 January 2024. Saudi Arabia is yet to confirm its membership, but has sent a representative to the Kazan Summit.
A new nomenclature is yet to be assigned to this expanded membership, but it may be something around ‘BRICS +’.
The BRICS nations account for about 45%of global population. Taken together, their economies account for about 28% of global GDP. That’s around $28.5tr.
At the Kazan Summit, leaders of the nations in the BRICS grouping predicted its influence would grow, outlining common projects, ranging from grain exchange to cross-border payments system.
According to the Russian President, Vladimir Putin, “the trend for the BRICS’ leading role in the global economy will only strengthen.” He cited population growth, urbanization, capital accumulation, and productivity growth as key factors.
Read Also: Putin offers to host next BRICS summit in Russia
“BRICS countries are among the world’s largest producers of grains, legumes, and oilseeds. In this regard, we proposed opening a BRICS grain exchange,” Putin told the leaders.
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He added that the exchange “will contribute to the formation of fair and predictable price indicators for products and raw materials, considering its special role in ensuring food security”.
“The implementation of this initiative will help protect national markets from negative external interference, speculation, and attempts to create an artificial food shortage,” Putin said.
The Russian President, who is facing Western sanctions over his war on Ukraine, has sought to use the BRICS summit to promote an alternative payments system to bypass trade restrictions.
Other leaders such as Brazilian President Luiz Inacio and India’s Prime Minister Narendra Modi, backed the creation of a common cross-border payments system, which would help BRICS countries trade with each other, bypassing the dollar-dominated global financial system.
The Brazilian President noted that the group’s New Development Bank (NDB) was designed as an alternative to what he called “failing Bretton Woods institutions” such as the International Monetary Fund (IMF).
The Russian President also called for the creation of a BRICS investment platform, which will facilitate mutual investment between BRICS countries and could also be used for investment in other countries in the Global South.
Impact on Nigeria
Two members of the BRICS grouping, China and India, are Nigeria’s largest trading partners, accounting for about 52.2% of Nigeria’s total trade.
According to data provided by the National Bureau of Statistics for 2022, India received about 12.6% of Nigeria’s total exports. This is the largest by any single country. China supplied about 22.7% of Nigeria’s total imports.
The implication of this is that with the institution of a multi-polar economic system as proposed by the BRICS group of nations, a new payments system may come into force. Local currencies may be used by trading partners within the BRICS grouping.
This could have enormous benefits for Nigeria’s struggling foreign exchange market which is plagued by an insufficient quantity of the US dollar to meet Nigeria’s ever growing import demands.
The Naira has fallen to an all-time low, compared to major foreign currencies. A solution to this may lie in the proposals emerging from the Russian BRICS summit.
A situation where Nigeria can trade with China using the Naira or the Yuan may ease pressure on the local currency by eliminating the need to source for scarce US Dollars to meet trading obligations.
Adopting the proposed BRICS economic system may afford Nigeria the opportunity to de-risk and diversify the economy from the chock-hold effect of the current dollar-dominated global economic system.
Source – The Nation
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