Nigeria and South Africa in Global Economic Governance
A Dialogue Proposal
Background
In April 2014 Nigeria’s officially rebased GDP was revealed. At USD 500 billion the South African economy is now approximately 60 percent as large as Africa’s newfound largest. While Nigeria has always loomed large in African politics, it has never played a substantial role on the global stage; that role was traditionally reserved for South Africa, which has been a key participant in global economic governance processes since 1994. South Africa, in addition to representing its own interests in those processes, also seeks to represent African interests. This has been particularly apparent in the G20 and BRICS Heads of State Summit activities, and to a lesser extent in the World Trade Organization and UNFCCC negotiations.
Now that Nigeria is officially the largest economy in Africa, not only does it have a legitimate claim to a seat in global economic governance processes, but also many people are looking to the country to show leadership in this respect. Yet at the same time informed observers are aware that the country faces significant domestic challenges that hamper and potentially erode its institutional capacity to effectively participate in, and shape, global economic governance. Internal security in the face of Boko Haram’s predations is the most obvious threat, but there are many others, particularly institutional restraints. Therefore the primary hurdles Nigeria needs to overcome before the international red carpet is laid before it, are domestic and governance related. Simply put if Nigeria struggles to govern itself its role on the global stage will both be hampered and not taken seriously.
Accordingly, Nigeria needs to seriously reflect on the roles it could play in global economic governance in light of domestic constraints. This dialogue will focus primarily on the G20 process, but will also pay some attention to the BRICS and WTO.
Nigeria in Global Economic Governance: G20, BRICS and the WTO
The G20 is arguably the most influential apex grouping of systemically significant economies, notwithstanding its evident coordination challenges. It plays an important role in setting the global agenda in finance, macroeconomics, growth, and a range of development related topics of concern to Nigeria, and Africa more broadly. So the first task of the dialogue is to explore the contours of Nigeria’s potential G20 engagement. For example, a key aspect of Nigeria’s GDP rebasing is the emergence of the services sector, and financial services in particular, giving Nigeria an important and growing stake in global and African financial regulation discussions. Similarly, Nigeria’s economic scale leaves a growing macroeconomic imprint on its immediate neighbours, and increasingly Africa as a whole. And Nigeria clearly has an
interest in the G20’s development agenda, and presumably in championing African interests, broadly defined, within that.
Key to effective participation in international negotiations is alliance formation. While the G20 does not contain rigid alliances, a number of quasi blocs play varying roles within it. The G7 Finance Ministers and Central Bank Governors still meet before G20 meetings to discuss issues of common concern. Substantially in response, the BRICS has recently surfaced as an embryonic geopolitical grouping aiming to exert the influence of key emerging powers in global governance generally, and economic governance in particular. Furthermore, the G20 contains a range of ‘middle powers’ that forge alliances on particular issues. How would Nigeria position itself in such a kaleidoscope?
Finally, the WTO is at the centre of the global trading system and, notwithstanding its evident negotiation challenges, continues to shape the emerging architecture of global trade and investment rules. Nigeria wants to forge a diversified economy, with manufacturing playing a key role in the future. Global trade rules both constrain and enable this objective, and also apply to other key sectors of the Nigerian economy, particularly agriculture. One area that is not sufficiently covered by the WTO is services, now at the cutting edge of Nigeria’s rapidly expanding GDP. But the WTO remains mired in the doldrums, its recent Bali success notwithstanding. As Nigeria’s economy grows and diversifies, how should it envisage its role in the WTO in the future?
In all three global economic governance forums – G20, BRICS, WTO – South Africa already plays an important role. Therefore both countries core domestic interests in these forums needs to be outlined and mutual collaboration possibilities and constraints explored. Furthermore, since both countries are interested in broader African development issues, to what extent could they coordinate in those forums to elevate African issues onto the global stage? Could the NEPAD spirit be rekindled, for example? This almost certainly would require an enhanced, deeper, and trust-based bilateral relationship between the two; a crucial ingredient that many observers think is currently missing. Trade and investment relations are central to building bilateral ties. For example some have proposed that the two countries, or more accurately SACU and Nigeria, should negotiate a bilateral free trade agreement in order to cement their collaboration. This could conceivably incorporate ECOWAS, and ultimately become the pivotal South-West axis to drive continental integration.
In this light the dialogue will explore global collaboration possibilities in light of the opportunities and constraints confronting expansion of bilateral ties between Nigeria and South Africa.