West African monetary unification : the case for a common currency
In recent years, scholarly attention on the complementary role of monetary integration to further economic integration in developing countries has tended to emphasise the direct and indirect benefits of 'limited monetary integration' while neglecting considerations of those benefits likely to accrue from adopting a common currency or fixed rates of exchange between their national currencies. However, the decision by the Heads of State and Government of the 16 members of the Economic Community of West African States (ECOWAS) in May 1983 requesting a study of proposals leading to the creation of a single ECOWAS monetary zone has given a new scope and dimension of interest in the economics of common currencies. The West African countries in their efforts to integrate and achieve higher growth and development are increasingly frustrated by a number of internal and external factors including their dependent, disintegrated and inefficient patterns of domestic production, trade and currency systems, in particular, the continuing weakness and increasing precariousness of their national currencies, and a succession of global monetary and financial crises. These constraints, together with the payments and adjustment problems they have occasioned, and the relative unsuccessful experiences in currency management, payments and exchange restrictions within the West African Clearing House (WACH) and the exclusively francophone West African Monetary Union (WAMU or UMOA), have created a need for extending and deepening the scope for monetary and economic cooperation in the region. The Study advocates principally an all-embracing monetary union by means of a common currency as a strategic catalyst and timely element of realism that would create an impulse for national development and regional economic integration. Using basic propositions concerning aspects of monetary integration, stressing in particular the foundations of optimum currency areas, the Study tries to present a comprehensive and analytic discussion of the feasibility, processes, beneficial effects and constraints involved in achieving currency unification in the broader setting of West Africa's disparate economic and socio-political developments.