Common Currency: The Signification of Economic Integration


Oladele Omosegbon

Abstract

The Economic Community of West African States has been struggling with the creation of a common currency since 2003, when the Eco was scheduled to circulate. We have witnessed several postponements since then, the latest being from 2015 to 2020. All agents desire a united West Africa, just like the African Union and its members states desire a developed and united Africa. But if asked about using a common currency, many decision makers run into uncertainties and ambiguities. For many policy makers, the decision of whether to accept a common currency is a big irritation and an embarrassing nuisance. Academics tend to be intellectually dishonest about the importance of money in an economic community. On the one hand, they display remarkable niceties and dexterity via, for instance, the optimal currency area research, of the near impossibility and incongruence of a common currency in most African regional economic communities.

On the other hand, these same intellectuals are quick to go into the exegesis of economic integration in, inter alia, stating that economic union tends to ensure the free the flow of human and material resources among cooperating nations. But this is intellectually dishonest, because, as we argue, only when common money is instituted can there be the kind of benefits everyone is talking about regarding economic union and cooperation among nations. For that reason, we show that common currency is a necessary condition for an economic community to exist but not sufficient. This fact alone, we show, allows some flexibility for ECOWAS, as indeed other regional economic communities in Africa, to establish a functional common currency that will kick start a rather uninspiring, invariant economic fortune since the colonizing countries of Europe left Africa more than fifty years ago. At the individual level, money helps to create freedom; the freedom to move and the freedom to live. At the firm level, money dictates the flow of resources and of the exercise of preferences by consumers and producers. It is the basis of intertemporal, intergenerational and international transfer of resources. At the level of a nation and hence an economic community, common currency facilitates the competitive power of the community in trade and in the bidirectional flow of assets.

Common currency is necessary for an economic union and can be created with a lot less difficulty than our African leaders have made it to look so far. After all, without economic union, Africans have been in currency unions before. We show that currency unions have been established in Africa, to name the most important, in the British West African pound, the East African Shilling and in the many facets of the CFA franc. A common currency is a necessary condition for the realization of the benefits of integration. Common money is the signification of an economic community and a united and developed people. The importance of African economies in global trade is not going to be judged by the power of each country’s economy, for there is none, or the stability provided by the benevolence of a colonial master in the use of, for instance, the CFA franc, but in the actual share of the proposed Eco in world official foreign reserves, its liquidity in international trade and its role as a competitor against existing reserve currencies like the U.S. dollar, the Euro, the Pound Sterling, the Yen and the Yuan. The ascendancy of ECOWAS countries in the world stage is going to depend on the size of its economy and in the use of its currency as an intervention and an anchor money. This is only possible if ECOWAS as an economic community comes to full fruition with a flourishing common money, commanding a widely acceptable internal purchasing power.


Recent Publications - View all