A skit circulating in the cyberspace is said to be the story of the Nigerian economy: in just two minutes the exchange rate of the naira to a dollar rises from N730 to N1,200.
In the hilarious video, a man desperately in need of dollars for a trip engages a seller of the foreign currency in a negotiation. The buyer is told that the exchange rate has changed from N730 to a dollar agreed before the meeting to N790. Although the buyer gets angry and insults his customer because of the hike, yet he reluctantly agrees to pay the new rate. But before the greenbacks could be handed over to the buyer the seller’s phone rings and he tells his customer that, in fact, the rate is now N830 to a dollar. Almost simultaneously the buyer gets a call from another source that the rate is N880. The buyer now gets angrier about the rising price of the dollar. He rains curses on the second customer. Even the physically present seller condemns the excessive rate from the other seller only for his own phone to ring again. The seller is informed that the rate has risen to N900 to a dollar. The seller again urges the buyer to pay the new rate while the later threatens to assault the former if the phone rings again. And before the seller could finish counting the dollar bills he gets yet another call that the rate is now N1,200 to a dollar, all within two minutes! With more curses and insults, the exasperated buyer carries the seller out of the scene…
Discussions of the state things in the economy seems to begin and end with the exchange rate of the naira to a dollar. Every economic problem of Nigeria seems to have a dollar dimension. The dollar question is clearly at the root of the fuel price crisis. Somehow, the fetishisation of the dollar has assumed an unimaginable proportion. You are sometimes told of the “dollar component” in the production of a commodity or the provision of a service that has no foreign input.
Senior Advocate of Nigeria Femi Falana calls it the “extreme dollarisation of the Nigerian economy” in a sharp critique of policies in the last few years from a political economy standpoint. Against the laws of the land, domestic transactions are conducted in dollars by the few people who have access to the American currency. Dollar is used to buy property and pay rents within Nigeria. School fees are professional fees are settled in dollars in the country. This trend is often ignored as the focus is on foreign payments when talking about the price of dollar. The lawyer has called on policymakers to explore alternatives to the dollar as some other countries are doing in the face of the economic crisis.
Among other suggestions, Falana has called for a debate on Nigeria’s membership of the BRICS, the acronym for a group of five countries – Brazil, Russia, India, China and South Africa. These countries are largely defined by their geo-political importance, rates of economic growth and, of course, their sizes.
Although “de-dollarisation” is not on the agenda, the use of local currencies among members will be in focus at the 15th summit of BRICS.
Yet, in talking about approaches to get out of the economic woods in Nigeria, BRICS is never a popular topic among the experts and policymakers.
South African President Cyril Ramaphosa has invited President Bola Tinubu and other African leaders to the next month’s summit of BRICS in Johannesburg, South Africa. As the host, Ramaphosa said he would like leaders of the other African countries to take the opportunity of the August summit “to have a dialogue” with the other BRICS leaders – President Xi Jinping of China, Brazil’s President Luiz Lula da Silva and Indian Prime Minister Narendra Modi. Russian President Vladimir Putin has wisely elected to stay away physically from the meeting so as to avoid a situation in which the purpose of the summit would be overshadowed by a diplomatic row that could ensue because of his presence in South Africa. The International Criminal Court has issued a hypocritical warrant of arrest against Putin for alleged war crimes in Ukraine. Putin will participate virtually while his foreign minister, Sergei Lavrov, will be on ground in South Africa. The secretary-general of the United Nations Antonio Guterres and the chairperson of the African Union President Azali Assoumani of the Union of Comoros are also expected to attend the meeting. Countries in Asia and Latin America have also been invited to the summit.
Although views are divergent within BRICS on the parameters for admitting new members, yet 23 countries have already applied for membership of BRICS. Among the applicants are Egypt, Indonesia, Saudi Arabia, Ethiopia, Iran, United Arab Emirates and Argentina.
The expansion of the membership of BRICS is expected to be a major issue on the agenda in the Johannesburg summit. While Brazil is not enthusiastic about expansion and India is said to be seemingly reluctant, China supports the idea for its own geo-political reasons while, for Russia, it is a route out of diplomatic isolation orchestrated by the West. But all are united on shaking off the dominance of the American dollar in their respective national economies while each struggles to earn a place in the landscape of the global economy. So, while the summit’s communique may not contain a farewell to the dollar, reflections will be devoted on alternatives.
Incidentally, the man who coined the acronym BRIC in 2001 (before the admission of South Africa in 2010 to make it BRICS), Lord Jim O’Neill, was reported by the London Financial Times yesterday as describing as “ridiculous” the proposition that BRICS countries should have a common currency as a possible alternative to the dollar. He wondered if BRICS could create a central bank. He asked: “How would you do that?” This was apparently in response to Lula who has been radically championing the idea of a common currency. The huge irony is that the original conceptual promoter of BRICS now has a lot of uncharitable things to say about the economic group. O’Neill’s latter-day pessimism about an economic united front on the part of BRICS is hinged, among other things, on the “endless historical battles” between China and India. According to him, BRICS as a group has “never achieved anything since they first started meeting.” For him, that’s one reason America should not worry about any viable challenge to the dominance of the dollar. However, O’Neill is honest enough to admit that dominance of the dollar has been to the disadvantage of the emerging economies. He told the Financial Times: “The dollar’s role is not ideal for the way the world has evolved. You’ve got all these economies who live on this cyclical never-ending twist of whatever the (US Federal Reserve) decides to do in the interests of the US.”
This reservation of O’Neill about the dollar is at least one point that should attract the attention of Nigerian policymakers and experts. After all, the intellectual provenance of the BRICS is traced to O’Neill, who first mentioned BRIC in a 2001 paper he wrote as the chief economist of Goldman Sachs. He observed that the four largest “emerging economies” were contributing more growth to the world economy than the seven leading industrialised countries called the G7 – the United states, Japan, Germany, the United Kingdom, France, Italy and Canada. O’Neill had optimistic projections for individual members of BRICS especially China and India.
That was 22 years ago.
But it was not until 2009 that the BRIC countries began to meet yearly in a formal sense. The BRICS countries support the New Development Bank based in Shanghai, China, which they project as a counterpoise to the World Bank and the International Monetary Fund (IMF).
With a combined population of over 3 billion, the BRICS represent about 40% of the world population and 26% of the global economy. Regardless of the western cynicism about BRICS, its collective economic and geo-political stature in the global arena is what is attracting other nations to join the group. These are countries which like to chart a different path to prosperity. Hence, BRICS cannot be ignored as a force. Inherent in the spirit of BRICS is actually the quest for a new world order freshly pursued in the 21st Century. As a western economist noted recently, the emergence of BRICS is a ringing statement that the G7 can no longer run the world economy the way it has done for decades with a contested history.
However, the lack of enthusiasm about BRICS in Nigeria among experts and policymakers is ideological and can easily be explained. The only model that is considered workable in Nigeria is the one approved by the World Bank and the IMF. Meanwhile, it is the United States that choses the president of the World Bank and the manging director of the IMF is always a European candidate. Policymakers in Nigeria still subjectively retains what was termed the TINA mindset in the course of the vigorous debate on the Structural Adjustment Programme (SAP) in the 1980s. The full meaning of TINA here is There Is No Alternative. It is a philosophical problem which is hardly discussed because it is assumed that successive administrations work with templates built with the same economic thoughts. For policymakers, no alternative could be contemplated outside the western orthodoxy. Yet, countries in Asia that have moved up in the ladder of development have not been fixated with these IMF and World Bank models which our experts sell here with enormous energy and confidence.
The other day a television anchor wondered if South Africa could afford the risk of fraternising with Russia that’s under heavy western sanctions. So, the gentleman expects America and its western allies to punish South Africa for opting for its own path to development and formulating its relations with other countries on that basis. Yet, no nation needs the permission of a superpower to chart its path to progress.
In sum, Nigeria should be interested in what is taking place at the BRICS arena. Alternatives should be explored in finding strategic solutions to Nigeria’s economic problems. That’s at least one reason why BRIC should matter to Nigeria regardless of what the western cynics say about the group.