A single West African currency in 2020: A reality check (2)

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• Kwabena Yeboah 8 years ago

  There have been many attempts by ECOWAS to establish a West African common currency, the eco, but all attempts have failed and the likelihood of getting a West African currency grows dimmer by the day. There are several reaso ...
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  There have been many attempts by ECOWAS to establish a West African common currency, the eco, but all attempts have failed and the likelihood of getting a West African currency grows dimmer by the day. There are several reasons for this:
  
  1) Currencies do not do well in badly managed economies, where inflation, unemployment and bad fiscal policies persist.
  2) There is no dominant economy in the reason to fend off economic shocks for the new currency, the eco. In the euro zone for instance, Germany and France are dominant economies and are able to fend off world economic tremors that seek to threaten the euro due to their sizes. The only dominant economy in the eco (the West African currency) zone is Nigeria, but then we know the Nigerian economy and how it's been managed.
  3) Complementarities - there are no complementarities in our exports. No country in ECOWAS exports finished goods. They all export raw materials and non industrial products. In fact, the most critical condition for the survival of every currency is trade among the member states, which is non-existent in the ECOWAS zone. Only 13% trade exists among ECOWAS members and this is not strong enough to support a local currency.
  4) Corruption - Currencies do not thrive in a corrupt environment, and most west African countries are corrupt. If a currency is a measure of value, then in a corrupt society this will be impossible.
  
  There are more other reasons why the eco will not survive the present economic climate in the ECOWAS zone, but the four reasons above would suffice for now.

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