West African Case Study: ECOWAS to Launch ‘Single Currency’

Go Lean Commentary

The Caribbean has the poorest country in the Western Hemisphere: Haiti. But even that is not the poorest (least developed) country in the world; that distinction belongs to 34 countries in Africa; see the full list in the Appendix below.

Yet still, there are lessons that some countries in Africa can teach us here in the Caribbean. One such lesson – Case Study – is the Economic Community of West African States (ECOWAS); see the full news article here of the endeavor for a Single Currency:

Title: ECOWAS leaders agree on single currency by 2020
The 4th meeting of the Presidential Taskforce on a common currency for the West African Monetary Zone (WAMZ) has taken place in Niamey, the capital of Niger, with the firm commitment towards the acceleration of the processes leading to the use of the single currency by 2020.

The meeting was attended by the members of the Presidential Taskforce, namely the President of Ghana, Nana Addo Dankwa Akufo-Addo; the President of the Federal Republic of Nigeria, Muhammadu Buhari; the President of Cote d’Ivoire, Alassane Ouattara; and the host, Mahamadou Issoufou, President of Niger.

Chairperson of the Economic Community of West African States (ECOWAS), Faure Essozimna Gnassingbé, President of the Togolese Republic, was also present, and took part in the proceedings.

In a communiqué issued at the end of the 1-day meeting, on Tuesday, 24th October, 2017, the members of the Taskforce took note of the report of the Ministerial Committee meeting held earlier, and acknowledged the quality of the conclusions as well as the relevance of the recommendations made, whose substantive parts relate to the measures for the acceleration of the ECOWAS single currency programme.

The Taskforce appreciated the progress made by all ECOWAS institutions involved in the conduct of ECOWAS Single Currency Roadmap activities, and reaffirmed its commitment to the pursuit and the acceleration of the economic, financial and monetary integration agenda of ECOWAS.

In endorsing the main recommendations of the Ministerial Committee, the Taskforce urged Member States to pursue the structural reforms of their respective economies, to help them deal with fluctuations in the prices of raw materials, and enable their economies to be more resilient to exogenous shocks.

Additionally, the Taskforce urged Member States to take the necessary measures, including the attainment of the convergence criteria, necessary for the creation of the ECOWAS single currency by 2020.

The Communiqué noted that the Taskforce has “instructed the Ministerial committee to meet within three months to propose a new roadmap to accelerate the creation of the single currency by 2020. In this framework, a gradual approach can be undertaken, where a few countries, which are ready, can start the monetary union, whilst the other countries join later.”

The Presidential Task Force will hold their next meeting in Accra, in February 2018.

It will be recalled that at the Extraordinary Summit of Heads of State and Government on 25th October, 2013, the Presidents of Ghana and Niger were appointed to oversee the creation of the single currency in a timely manner.

The two Presidents constituted a Task Force, whose membership included representatives of the President of Ghana and Niger; Ministers of Finance of Ghana and Niger; Governors of the eight Central Banks of ECOWAS member States; ECOWAS and UEMOA Commissions; West African Monetary Agency (WAMA) and the West African Monetary Institute, to advise them periodically on the monetary integration programme.

The membership of the taskforce was reviewed in 2015 to include the Presidents of Cote d’Ivoire and Nigeria, as well as the Ministers of Finance of the two countries.

The inaugural meeting of the Presidential Taskforce was held on 20th and 21st February, 2014 in Niamey. Subsequently, two other meetings were held in Accra on 7th and 8th July, 2014, with the last meeting held in Niamey from 4th to 6th February, 2015.

The main objectives of the third meeting were to examine the revised roadmap on the realisation of the ECOWAS single currency by 2020; a proposal from the ECOWAS Commission on the creation of an ECOWAS monetary Institute by 2018; and the concern raised by the WAMZ Convergence Council on the revised macroeconomic criteria adopted by the 45th Ordinary Summit of the Heads of State and Government held in Accra on 10th July, 2014.

After the third meeting, it was agreed, amongst others, that the Central Bank financing criterion be reclassified as a primary criterion because of its strategic importance to monetary and price stability. The revised roadmap on the realisation of the ECOWAS single currency by 2020 was to be costed, and sources of funding identified.
Source: Posted & retrieved on October 24, 2017 from: http://3news.com/ecowas-leaders-agree-single-currency-2020/

While ECOWAS has 15 member states, eight of these are French-speaking, five are English-speaking and two Portuguese-speaking – as of February 2017, not all are participating in this Single Currency endeavor … yet. (See Appendix VIDEO below on ECOWAS). The member-states that have pledged to launch this Single Currency in time for 2020 are as follows:

  • Ghana
  • Nigeria
  • Cote d’Ivoire
  • Togo

Why is this endeavor important and how can it guide the Caribbean? The foregoing article cited the rationale with this one quotation:

“enable their economies to be more resilient to exogenous shocks”.

This is a familiar advocacy for the movement behind the book Go Lean…Caribbean. In a previous blog-commentary from May 9, 2014 the merits of Single Market economic integration were related as follows:

Europe has the safety net of the economies-of-scale of 508 million people and a GDP of $15 Trillion in 28 member-states in the EU; (the Eurozone subset is 18 states, 333 million people and $13.1 Trillion GDP). The US has 50 states and 320 million people. Shocks and dips can therefore be absorbed and leveraged across the entire region .The EU is still the #1 economy in the world; the US is #2.

The Caribbean has no safety-net, no shock absorption, and no integration. This is the quest of the book Go Lean…Caribbean; it urges the introduction and implementation of the Caribbean Union Trade Federation (CU). The book serves as a roadmap for this goal, with turn-by-turn directions to integrate the 30 member-states of the region and forge an $800 Billion economy.

The Go Lean roadmap signals change for the region. It introduces new measures, new opportunities and new recoveries. Economies will rise and fall; the recovery is key. Prices will inflate and deflate; as depicted in the foregoing article, there are curative measures to manage these indices. The roadmap calls for the establishment of the allied Caribbean Central Bank (CCB) to manage the monetary affairs of this region. The book describes the breath-and-width of the CCB.

There are many benefits when multiple countries come together and form a Single Market economy. This is also the quest for the CU/Go Lean roadmap: to form a Single Market and make the Caribbean’s member-states “Pluralistic Democracies”. Pluralism – recognition and affirmation of diversity within a political body – applies in this West African Community as well; as these countries have a diverse mix of tribal affiliation, colonial legacy and language prioritization. These African developments are therefore fitting for a Case Study for the Caribbean to consider.

This CU/Go Lean roadmap therefore urges the same Single Market effort with these 3 prime directives:

  • Optimization of the economic engines in order to grow the regional economy and create 2.2 million new jobs.
  • Establishment of a security apparatus to ensure public safety and protect the resultant economic engines.
  • Improvement of Caribbean governance to support these engines, including a separation-of-powers between the member-states and CU federal agencies.

A Single Currency in West Africa – eventually: Eco – is not so unfamiliar. There are two current currencies that fit the mold:

The West Africa Monetary Zone – identified in the foregoing news article – attempts to establish a strong stable currency to rival the CFA franc, whose exchange rate is tied to that of the Euro and is guaranteed by the French Treasury. The eventual goal is for the CFA franc and “Eco” to merge, giving all of West and Central Africa a single, stable currency. The launch of the new currency – with a target date of 2020 – is being developed by the West African Monetary Institute based in Accra, Ghana.

Wow, for the BIG ideas… to elevate the economic engines for 155 million people in West Africa.

The Go Lean book also presents a BIG idea for reforming and transforming the economic engines of the 42 million people in our 30 Caribbean member-states; the book stresses that our effort must likewise be a regional pursuit, and it must also optimize our currency landscape. This was an early motivation for the roadmap, as pronounced in the opening Declaration of Interdependence (Pages 12 – 13):

xi. Whereas all men are entitled to the benefits of good governance in a free society, “new guards” must be enacted to dissuade the emergence of incompetence, corruption, nepotism and cronyism at the peril of the people’s best interest. The Federation must guarantee the executions of a social contract between government and the governed.

xvi. Whereas security of our homeland is inextricably linked to prosperity of the homeland, the economic and security interest of the region needs to be aligned under the same governance. Since economic crimes … can imperil the functioning of the wheels of commerce for all the citizenry, the accedence of this Federation must equip the security apparatus with the tools and techniques for predictive and proactive interdictions.

xxiv. Whereas a free market economy can be induced and spurred for continuous progress, the Federation must install the controls to better manage aspects of the economy: jobs, inflation, savings rate, investments and other economic principles. Thereby attracting direct foreign investment because of the stability and vibrancy of our economy.

The Go Lean book provides 370-pages of turn-by-turn instructions on “how” to adopt new community ethos, plus the strategies, tactics, implementations and advocacies to execute so as to reboot, reform and transform the societal engines of Caribbean society. There is a lot of consideration in the book for optimizing the currency and monetary eco-systems. Consider this excerpt detailing the Money Multiplier concept; from Page 22:

b-1. Money Multiplier

In monetary macroeconomics and banking, the money multiplier measures how much the money supply increases in response to a change in the monetary base. The multiplier may vary across countries, and will also vary depending on what measures of money are considered. For example, consider M1 as a measure of the U.S. money supply, and M0 as a measure of the U.S. monetary base. If a $1 increase in M0 by the Federal Reserve causes M1 to increase by $10, then the money multiplier is 10.

A money multiplier is one of various closely related ratios of commercial bank money to central bank money under a fractional-reserve banking system. Most often, it measures the maximum amount of commercial bank money that can be created by a given unit of central bank money. That is, in a fractional-reserve banking system, the total amount of loans that commercial banks are allowed to extend (the commercial bank money that they can legally create) is a multiple of reserves; this multiple is the reciprocal of the reserve ratio, and it is an economic multiplier.

Banks are allowed to lend out the monies on deposit up to some regulated maximum. If banks lend out close to that maximum allowed by their reserves, then the inequality becomes an approximate equality, and commercial bank money is central bank money times the multiplier. If banks instead lend less than the maximum, accumulating excess reserves, then commercial bank money will be less than central bank money times the theoretical multiplier.

As a formula and legal quantity, the money multiplier is neither complicated nor controversial – it is simply the maximum that commercial banks are allowed to lend out. However, there are various theories/tools/techniques concerning the mechanism of money creation in a fractional-reserve banking system, and they all have implications on monetary policy. As such this sphere of concern is normally managed by the professionals, classically-trained technocrats.

The conclusion of this consideration is straight forward – there is a multiplier associated with the currency in the money supply. Therefore it goes without saying that if the Caribbean member-states trade in US dollars, then the multiplier effect is extended to the United States of America. By contrast, if the Caribbean member-states trade in Euros, then the multiplier effect goes to the stakeholders of the European Central Bank – no Caribbean state. Therefore the communities of the Caribbean must embrace, as an ethos, its own currency, the Caribbean Dollar (managed by a technocratic Caribbean Central Bank), thereby bringing local benefits from local multipliers.

There have been a number of previous blog-commentaries by the Go Lean movement that have highlighted Case Studies on monetary and currency best practices. See a sample list here:

http://www.goleancaribbean.com/blog/?p=10513 Case Study from India: Transforming Money Countrywide
http://www.goleancaribbean.com/blog/?p=7140 Case Study from Azerbaijan: Setting its currency on free float
http://www.goleancaribbean.com/blog/?p=6800 Case Study from Venezuela: Suing Black Market currency website
http://www.goleancaribbean.com/blog/?p=4166 Case Study from Panama: History of the Balboa Currency
http://www.goleancaribbean.com/blog/?p=3858 Case Study from ECB: Unveiling 1 trillion Euro stimulus program
http://www.goleancaribbean.com/blog/?p=3814 Case Study from Switzerland: Unpegging the franc
http://www.goleancaribbean.com/blog/?p=360 Case Study on Central Banks: Creating Money from ‘Thin Air’
http://www.goleancaribbean.com/blog/?p=833 Case Study from the Euro: One Currency, Diverse Economies

In summary, shepherding the economy is no simple task. It requires the best practices of skilled technocrats. Hopefully these West African States will thrive with this new Single Currency effort as they embrace monetary best-practices.

We will be watching!

Hopefully too, the Single Currency efforts in our region – Caribbean Dollar – will manifest before 2020. The benefits are too alluring to ignore: growing the monetary supply, expanding the availability of investment capital and leveraging across a larger base to absorb the shocks naturally associated with a Free Market Economy. Wow; let’s get started.

We are past the time of needing Central Banking reform. We now need to Catch-Up and transform our own society to derive some of these benefits and innovations.

We urge all Caribbean stakeholders – government officials, bankers and ordinary citizens – to lean-in for the empowerments detailed in this Go Lean roadmap. These are best practices! These can make our homeland a better place to live, work and play. 🙂

Download the free e-book of Go Lean … Caribbean – now!

Sign the petition to lean-in for this roadmap for the Caribbean Union Trade Federation.


Appendix – Current Least Developed Countries

Click on Photo to Enlarge

Source: Retrieved Wikipedia Online Encyclopedia October 25, 2017 from: https://en.wikipedia.org/wiki/Least_Developed_Countries#Africa_.2834_countries.29  


Appendix VIDEO – About ECOWAS – https://youtu.be/f2m2UCuEYAs


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