A couple of weeks ago, I reflected on the struggle for the heart and soul of Africa by foreign entities seeking to hegemony over our lives and destiny. In my column titled, “The second scramble for Africa”, I denoted that a mighty struggle on political, economic, cultural and military scale is ongoing ‘for the control of African lands, resources and people.’
In the last few days, the competition between the United States, Russia, and China in the continent has become increasingly intense. All three countries are vying for influence and economic benefits in the continent, which is rich in natural resources and offers significant growth potential. The US has long been the dominant player in Africa, but Russia and China have been rapidly expanding their footprints in recent times.
Summarily, Russia has been particularly active in Africa, establishing military bases and conducting military operations in countries such as Sudan and the Central African Republic through the Wagner Group. The country has also signed numerous economic agreements with African nations, particularly in the energy sector.
China, meanwhile, is the largest trading partner of several African countries and is investing heavily in infrastructure projects across the continent through its Belt and Road Initiative.
The United States has sought to counter the influence of Russia and China in Africa through the establishment of the US-Africa Summit and increased economic and military aid to African nations.
The competition between the United States, Russia, and China in Africa is likely to continue and intensify as all three countries seek to expand their global reach and economic influence.
But in this intriguing contest, there is an emerging game changer in favour of Sino-Russian alliance in the guise of the BRICS, an acronym of a group that represents five of the world’s emerging economies, namely Brazil, Russia, India, China, and South Africa. These countries are recognized for their substantial contributions to global economic growth and development. The term BRICS was first coined by Jim O’Neill, a former economist at Goldman Sachs, in 2001. It was initially used to describe the shift in global economic power from developed countries to emerging economies.
Today, this group is fervently seeking to dump the US Dollar as the global currency. This would mean that financial transactions and global trade would no longer be based on the value of the greenback, but would instead utilize another currency or a basket of currencies.
Last year, BRICS countries proposed creating their own currency in order to move away from the US dollar and the euro in mutual transactions. International settlements in those currencies were made difficult for Russia, a BRICS founding member, by Ukraine-related sanctions. More recently, Russian President Vladimir Putin suggested the use of the Chinese yuan in transactions with BRICS allies and other international partners in Asia, Africa and Latin America.
Sadly for the United States, the BRICS profile is now growing tangentially across the globe especially in Africa. Experts suggest that before the year end, many African countries will join the group because of widespread concerns about US economic stability, political instability, inflation, weakness of the US Dollar, and the potential for United States political interference in global finance as it seeks for the dollar’s continued global dominance.
Earlier this year, Russian Foreign Minister Sergey Lavrov said that “more than a dozen” nations have expressed an interest in joining BRICS, including Nigeria, Algeria, Tunisia, Argentina, Bahrain, Bangladesh, Indonesia, Iran, Egypt, Mexico, Pakistan, Sudan, Syria, Türkiye, the United Arab Emirates and Venezuela. Meanwhile, Saudi Arabia, Egypt and Bangladesh have acquired equity in the New Development Bank, BRICS’ funding organization.
All these nations aspiring to join the BEICS and the replacement of the US dollar as global currency will be bolstered by a recent study which indicated that the bloc has a larger share of global GDP than the Group of Seven major economies.based on purchasing power parity.
According to data compiled by Acorn Macro Consulting, a UK-based macroeconomic research firm, the bloc of BRICS countries, Brazil, Russia, India, China and South Africa, contributes 31.5% of the world’s GDP. Meanwhile, the G7, consisting of the US, Canada, France, Germany, Italy, Japan and the UK, and considered the most advanced economic bloc of countries on the planet, add up to 30.7%.
The gap between the two groups is expected to continue to grow, analysts say, as China and India are experiencing robust economic growth, and more countries are interested in joining BRICS.
However, the move away from the US Dollar as the global currency would be a major shift that would require significant coordination among countries and could have wide-reaching effects on global trade and finance. Additionally, the US has a strong interest in maintaining the stability and power of the US Dollar and is likely to resist any significant push for change.
Presently, Nigeria is not formally a member of the BRICS but the country has been identified as one of the countries that could potentially join the group in the future due to its large population, significant natural resources, strong economic growth potential and tremendous influence within Africa.
Before now, Nigeria has engaged in various trade and investment deals with BRICS countries, particularly China. The Chinese government has invested heavily in Nigeria’s infrastructure, such as roads, railways, and airports, and has also funded various developmental projects in the country. India and Russia also have significant trade relations with Nigeria, particularly in the areas of oil and gas, agriculture and mining. Brazil and South Africa have also engaged with Nigeria on trade and investment, although to a lesser extent.
Nigeria signed a currency swap deal with China in 2018 worth about $2.5 billion, which allows the two countries to swap their local currencies without using the US dollar. This bilateral agreement came long before the Russian invasion of Ukraine which precipitated the recent move to ostracize the US Dollar as an international currency of exchange.
Under the agreement, Nigeria would be able to directly purchase Chinese yuan, while China can acquire naira. The Nigeria-Chuna deal reduces the pressure on Nigeria’s currency, the naira, and strengthen trade between both countries.
The currency swap watershed deal orchestrated by President Muhammadu Buhari further boost trade and investment between Nigeria and China by sidestepping the US Dollar while reducing reliance on foreign exchange reserves. It also facilitates easier access to trade finance and reduces transaction costs for businesses in both countries.
Since its implementation, the currency swap deal has been seen as a success, helping reduce the pressure on Nigeria’s foreign exchange reserves and stabilizing the value of the naira. The Central Bank of Nigeria has also extended the deal twice, indicating the importance of the partnership between the two countries.
I see the currency swap deal between Nigeria and China as a solution provider to the current move to substitute the US dollar as the global currency of trade and transaction. Nigeria has proven that currency swapping is an alternative to single-currency dominance in global trade. It is beneficial for countries in bilateral trade and has the potential to strengthen economic cooperation, and promote mutual respect.
