BRICS’ grow­ing clout and why Nige­ria is still ex­cluded

Financial Nigeria Magazine - - Contents - Efem N. Ubi, PhD, is a Re­search Fel­low and Head, Di­vi­sion of In­ter­na­tional Eco­nomic Re­la­tions, at the Nige­rian In­sti­tute of In­ter­na­tional Af­fairs, La­gos.

The BRICS club (Brazil, Rus­sia, In­dia, China and South Africa) held its 10th an­nual sum­mit on July 25-27 in Johannesburg, un­der the BRICS Chair­ship of South Africa. The theme for the 2018 sum­mit was “BRICS in Africa: Col­lab­o­ra­tion for In­clu­sive Growth and Shared Pros­per­ity in the 4th In­dus­trial Rev­o­lu­tion.”

The first BRIC Sum­mit, which held in 2009 in Rus­sia, ended with a joint state­ment that laid the foun­da­tions for an agenda on co­op­er­a­tion, re­form of in­ter­na­tional fi­nan­cial in­sti­tu­tions, food se­cu­rity, en­ergy se­cu­rity, cli­mate change, and de­vel­op­ment as­sis­tance, among other ar­eas of mu­tual in­ter­est. South Africa was not part of the group­ing at the time.

The 2018 sum­mit con­cluded with the is­suance of the 10th BRICS Sum­mit Johannesburg Dec­la­ra­tion, which con­tains 102 para­graphs with a num­ber of pledges. The pledges range from strength­en­ing mul­ti­la­ter­ism, to re­form­ing global gov­er­nance, co-op­er­a­tion on in­ter­na­tional peace and se­cu­rity, and part­ner­ship to­wards the fourth in­dus­trial rev­o­lu­tion.

The sum­mit had held dur­ing a pe­riod of an es­ca­lat­ing trade war be­tween China and the United States un­der Pres­i­dent Don­ald Trump and other re­cent US poli­cies that seem to be al­ter­ing global rules and norms. In para­graph 8 of the Johannesburg Dec­la­ra­tion, the BRICS de­clared: “We recom­mit our sup­port for mul­ti­lat­er­al­ism and the cen­tral role of the United Na­tions in in­ter­na­tional af­fairs and up­hold fair, just and eq­ui­table in­ter­na­tional or­der based on the pur­poses and prin­ci­ples en­shrined in the Char­ter of the United Na­tions, re­spect for in­ter­na­tional law, pro­mot­ing democ­racy and the rule of law in in­ter­na­tional re­la­tions, and to ad­dress com­mon tra­di­tional and non-tra­di­tional se­cu­rity chal­lenges.”

The BRIC con­cept – as coined by for­mer Gold­man Sachs' chief econ­o­mist, Jim O'Neill – pre­dates the for­ma­tion of the group as an eco­nomic bloc with for­mal agree­ments. In 2001, O'Neill had thought of Brazil, Rus­sia, In­dia and China as emerg­ing mar­kets that would wield sig­nif­i­cant power in the fu­ture and he pro­jected their com­bined economies would eclipse the ex­ist­ing ad­vanced economies by 2050. In 2011, South Africa – which was the largest African econ­omy at the time – of­fi­cially be­came a mem­ber of the group.

On the oc­ca­sion of the 10th an­nual sum­mit of the group, it is im­por­tant to ask some per­ti­nent ques­tions: First, is it pos­si­ble to pin­point the achieve­ments of this group? Has BRICS, which cov­ers 41 per cent of the world's pop­u­la­tion and 30 per cent of global ter­ri­tory as of 2016, been able to pro­tect the in­ter­est of the de­vel­op­ing world? I ask these ques­tions be­cause, at the Johannesburg Sum­mit, the group ex­pressed sat­is­fac­tion re­gard­ing the achieve­ments of BRICS over the last ten years. It stated the achieve­ments as strong demon­stra­tion of BRICS co­op­er­a­tion and de­lib­er­ated on ways to con­sol­i­date them mov­ing for­ward.

The group, hav­ing ac­counted for 50 per cent of global growth since 2009 and con­sti­tuted about 24 per cent of global GDP (over 18 tril­lion) in 2017, recog­nised the im­por­tant role of in­ter­na­tional trade and for­eign di­rect in­vest­ment in global eco­nomic re­cov­ery. In which case, the five economies view South-South co-op­er­a­tion as a key el­e­ment be­hind in­ter­na­tional de­vel­op­ment ef­forts.

One of the most no­table achieve­ments of BRICS is the cre­ation of the New De­vel­op­ment Bank (NDB), a mul­ti­lat­eral de­vel­op­ment bank that mo­bilises re­sources for in­fra­struc­ture and sus­tain­able de­vel­op­ment projects among the BRICS and in other emerg­ing economies and de­vel­op­ing coun­tries. The bank was set up to com­ple­ment the ex­ist­ing ef­forts of mul­ti­lat­eral and re­gional fi­nan­cial in­sti­tu­tions for global growth and de­vel­op­ment. Last month, S&P Global Rat­ings and Fitch Rat­ings both as­signed to NDB 'AA+' long-term is­suer credit rat­ings with a sta­ble out­look.

As part of the achieve­ments of the Johannesburg Sum­mit and a demon­stra­tion of ef­fec­tive co­op­er­a­tion among the BRICS economies, South Africa

Cur­rently con­sid­ered a fron­tier mar­ket, Nige­ria is also yet to join the club of emerg­ing mar­kets.

signed a deal that will see China in­vest $14 bil­lion in the coun­try over the next few years.

This brings me to my next point of dis­cus­sion. Why is Nige­ria not part of BRICS? Af­ter all, the South African econ­omy is com­pa­ra­bly the smallest econ­omy in the bloc, and cur­rently the sec­ond largest econ­omy in Africa, be­hind Nige­ria.

With the ad­mis­sion of South Africa into the BRICS mem­ber­ship, the coun­try's Stan­dard Bank had rightly said: "South Africa pro­vides the in­sti­tu­tional sta­bil­ity, depth of fi­nan­cial mar­kets, and reg­u­la­tory ef­fi­ciency that many cor­po­rates will look to cap­i­talise on as a base for wider pan-African op­er­a­tions." But South Africa did not just get in­vited by the BRIC economies to join them. It took diplo­macy and state­craft, un­der the lead­er­ship of for­mer Pres­i­dent Ja­cob Zuma, for the coun­try to gain mem­ber­ship into the group.

Given Nige­ria's eco­nomic sta­tus as the largest econ­omy in Africa, I will ar­gue that it meets cer­tain ba­sic cri­te­ria for a prospec­tive BRI'N'CS mem­ber­ship. Although Nige­ria's GDP shrank to $376 bil­lion in 2017, from its peak of $569 bil­lion in 2014 – and also dropped from be­ing the 26th largest in the world in 2014 to the 31st po­si­tion last year – the econ­omy still re­mains the largest in Africa. The coun­try is also the most pop­u­lous black na­tion with a pop­u­la­tion of over 190 mil­lion peo­ple.

How­ever, the coun­try falls short on a num­ber of other met­rics. For in­stance, the 2016 Hu­man De­vel­op­ment In­dex (HDI) re­port ranks Nige­ria in the 152nd po­si­tion out of 188 coun­tries. On this met­ric, the coun­try was closely fol­lowed by Cameroon in the 153rd po­si­tion and Zim­babwe in the 154th po­si­tion.

Cur­rently con­sid­ered a fron­tier mar­ket, Nige­ria is also yet to join the club of emerg­ing mar­kets. More­over, Nige­ria is also be­hind South Africa on the in­dus­tri­alised/semi-in­dus­tri­alised spec­trum. The GDP per capita of the largest econ­omy in Africa is a third of the sec­ond largest econ­omy on the con­ti­nent.

Jim O'Neill once opined on the prospect of Nige­ria join­ing the BRICS club, stat­ing that the coun­try was far from be­com­ing a mem­ber. The for­mer Gold­man Sachs ex­ec­u­tive said, “It is dif­fi­cult for Nige­ria to be­come as big as a BRIC, (at least in my life­time) be­cause it's kind of start­ing from a low base.”

Not­with­stand­ing, O'Neill in­cluded Nige­ria among the “N-11” or Next Eleven na­tions that will also emerge as eco­nomic pow­ers, along with the BRICS. The Nige­rian of­fi­cial­dom cel­e­brated the in­clu­sion of Nige­ria among the N-11, which are Bangladesh, Egypt, In­done­sia, Iran, Korea, Mex­ico, Nige­ria, Pak­istan, the Philip­pines, Turkey and Viet­nam.

Nige­ria and many of the economies in BRICS and N-11 had weath­ered the last Global Fi­nan­cial Cri­sis (GFC). How­ever, with the re­bal­anc­ing of the Chi­nese econ­omy and the fall in com­mod­ity prices in re­cent years, the growth mo­men­tum pre­vi­ously seen in these economies has ceased for the time be­ing.

Un­der the new nor­mal of un­cer­tain­ties in the global econ­omy, Nige­ria and other emerg­ing and fron­tier mar­kets need a struc­tural trans­for­ma­tion of their economies to achieve sus­tain­able eco­nomic growth. Or as stated in the 10th BRICS Sum­mit Johannesburg Dec­la­ra­tion, there has to be a fo­cus on de­vel­op­ment, in­clu­siv­ity and mu­tual pros­per­ity in the con­text of tech­nol­ogy-driven in­dus­tri­al­i­sa­tion and growth.

In para­graph 60 of the BRICS Dec­la­ra­tion, it says, “We are con­vinced that trade and tech­nol­ogy are vi­tal sources of in­clu­sive growth, in­clud­ing through eco­nomic in­te­gra­tion and con­sol­i­da­tion of global value chains in sus­tain­able and eq­ui­table ways. Tech­no­log­i­cal progress will have wide rang­ing im­pli­ca­tions for pro­duc­tion of goods and ser­vices as well as in­comes of peo­ple.” The Nige­rian govern­ment should take note.

Why is Nige­ria not part of

BRICS? Af­ter all, the South African econ­omy is com­pa­ra­bly the smallest econ­omy in the bloc, and cur­rently the sec­ond largest econ­omy in Africa, be­hind Nige­ria.

Group photo of the BRICS lead­ers: (from left) Chi­nese Pres­i­dent Xi Jin­ping; In­dian Prime Min­is­ter Naren­dra Modi; South African Pres­i­dent Cyril Ramaphosa; Brazil­ian Pres­i­dent Michel Te­mer and Rus­sian Pres­i­dent Vladimir Putin dur­ing the 10th BRICS Sum­mit in South Africa, July 2018

South African Pres­i­dent Cyril Ramaphosa and Nige­rian Pres­i­dent Muham­madu Buhari

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