It would indeed be illogical for Nigeria to abandon SWIFT entirely in favor of the BRICS payment system, especially considering that even the BRICS nations themselves continue to use SWIFT concurrently. Here’s why running both systems simultaneously is the most pragmatic approach for Nigeria:
1. Dual-System Use Among BRICS Countries Shows Strategic Necessity
- BRICS Members’ Dependence on SWIFT: Countries like Brazil, India, and South Africa, which rely on trade with both Western and Eastern markets, continue to use SWIFT alongside their emerging BRICS payment networks. This dual-system approach allows them to engage with Western markets seamlessly while exploring alternative trade routes within BRICS.
- Logical Implication for Nigeria: If BRICS nations themselves are not abandoning SWIFT, it would be even more illogical for Nigeria—a non-BRICS country with high trade dependencies on both BRICS and Western markets—to cut off SWIFT access. Maintaining SWIFT ensures Nigeria can continue facilitating trade with Western countries and other partners who are not part of BRICS.
2. Global Trade Realities and Diverse Partnerships
- Nigeria’s Diverse Trade Partners: Nigeria’s primary trading partners include a mix of BRICS countries (China and India) and Western nations (the U.S., EU countries). SWIFT remains the backbone for transactions with the U.S. and Europe, while BRICS integration could enhance regional and BRICS-aligned trade.
- Risk of Isolation from Western Markets: Dumping SWIFT would hinder Nigeria’s ability to transact with Western countries, risking a drop in trade volumes and increased transaction costs for those markets. By using both systems, Nigeria can maintain seamless access to both Eastern and Western economies.
3. Liquidity and Currency Stability
- SWIFT’s Established Liquidity for Global Currencies: The U.S. dollar, euro, and British pound dominate global trade and offer high liquidity, stability, and broad acceptance. The naira’s international trade relies on these stable, liquid currencies via SWIFT for major imports and debt servicing.
- Mitigating Currency Volatility with Dual Systems: The BRICS system, while promising for local currency trade, lacks the extensive liquidity and global acceptance of the dollar and euro in SWIFT. Using both systems would allow Nigeria to hedge its currency exposure, ensuring that transactions can occur in the most stable currency for each trade route.
4. Maximizing Economic Resilience and Reducing Risk
- Redundant Systems for Stability: Relying solely on an untested BRICS system introduces risk, as Nigeria’s access to global markets would hinge on the success of a new, evolving infrastructure. Running both systems in parallel offers redundancy, allowing Nigeria to manage trade continuity even if one system faces technical or adoption challenges.
- Adaptability to Future Shifts: By retaining SWIFT, Nigeria keeps the flexibility to pivot between systems as needed. This would provide resilience against economic shocks, geopolitical tensions, or shifts in trade policies, allowing Nigeria to adapt to global changes without jeopardizing trade access or economic stability.
5. Regulatory Compliance and International Standards
- SWIFT’s Compliance Framework: SWIFT’s compliance infrastructure is globally recognized, including established protocols for anti-money laundering (AML) and know-your-customer (KYC) regulations. Abandoning SWIFT would expose Nigeria to scrutiny if the BRICS system lacks comparable compliance standards, potentially impacting its reputation in global finance.
- Safeguarding Reputational Trust: By using both SWIFT and BRICS, Nigerian banks can maintain international credibility, ensuring they comply with global standards that facilitate trust with Western financial institutions. This is crucial for attracting foreign direct investment (FDI) and accessing international capital markets.
6. Foreign Direct Investment and Financial Market Access
- Dependency on Western Investors: Nigeria benefits significantly from foreign investment, much of which comes from Western countries operating through SWIFT. By cutting off SWIFT, Nigeria risks reducing access to these critical sources of capital, which support infrastructure projects, industrial development, and growth in key sectors.
- Capital Market Accessibility: Access to international financial markets, including stock exchanges and debt markets, is easier and more established through SWIFT. Keeping SWIFT would allow Nigeria to tap into global investment flows while also exploring BRICS-aligned opportunities where appropriate.
7. International Debt Obligations and Dollar Dependency
- Dollar-Denominated Debt: Nigeria has a considerable amount of external debt denominated in dollars. SWIFT facilitates these payments directly, reducing exchange risks and administrative hurdles. The BRICS system lacks the infrastructure to support dollar-denominated debt payments at scale, which would add costs and inefficiencies if Nigeria relied solely on it.
- Risk of Currency Conversion Costs: Dumping SWIFT would force Nigeria to convert naira or BRICS currencies into dollars to service debt, increasing transaction costs and exposure to exchange rate fluctuations. Using both systems allows Nigeria to optimize payment methods based on the currency required.
8. Geopolitical Neutrality and Diplomatic Flexibility
- Balancing Eastern and Western Alliances: If Nigeria abandoned SWIFT, it could signal a shift in alignment away from Western economies, which could strain diplomatic and economic relations with key partners. Maintaining both systems allows Nigeria to stay neutral and leverage its position in both Western and BRICS circles.
- Avoiding Isolation Risks: Western countries could view a total shift away from SWIFT as a political alignment with BRICS, which might limit Nigeria’s access to Western markets, sanctions relief, or trade agreements. By balancing both systems, Nigeria minimizes diplomatic risks while preserving maximum economic options.
9. Gradual Testing and Evaluation of the BRICS System
- BRICS System is Still Emerging: The BRICS payment network is new and unproven on a global scale, and it may take time for its capabilities, reliability, and compliance infrastructure to mature. BRICS countries themselves are adopting a cautious, dual-system approach, indicating that even the founders do not see it as a full SWIFT replacement.
- Testing Period Advantage: Running both systems allows Nigeria to test BRICS in a controlled, low-risk manner, identifying its strengths and weaknesses without risking trade or financial stability. This approach ensures Nigeria remains adaptable and informed about the BRICS system’s potential.
Conclusion: A Dual-System Approach is Essential for Nigeria
Given that even BRICS countries continue to rely on SWIFT for their diverse international trade needs, it would be illogical for Nigeria to abandon SWIFT entirely. The dual-system approach maximizes Nigeria’s economic flexibility, diplomatic neutrality, and access to global markets while allowing it to gradually explore the BRICS system’s potential.
By using both SWIFT and BRICS, Nigeria secures its current trade and investment channels through SWIFT while positioning itself to benefit from BRICS for regional and BRICS-aligned trade. This strategy is the most logical and prudent choice, ensuring that Nigeria can thrive in an increasingly multipolar financial landscape without sacrificing security, stability, or adaptability.
