An Assessment of the Proposed ECOWAS Single Currency in West Africa Sub-Region

International Journal of Humanities and Social Science

© 2019 by SSRG - IJHSS Journal

Volume 6 Issue 6

Year of Publication : 2019

Authors : Micah, Ezekiel Elton Michael, Edokpa Fadal Mary, Isaac Esezobor Ogbeifun

10.14445/23942703/IJHSS-V6I6P101

How to Cite?

Micah, Ezekiel Elton Michael, Edokpa Fadal Mary, Isaac Esezobor Ogbeifun, "An Assessment of the Proposed ECOWAS Single Currency in West Africa Sub-Region," SSRG International Journal of Humanities and Social Science, vol. 6,  no. 6, pp. 99-108, 2019. Crossref, https://doi.org/10.14445/23942703/IJHSS-V6I6P101

Abstract:

Currency convertibility and monetary integration activities of the Economic Community of West African States (ECOWAS) are directed at addressing the problems of multiple currencies and exchange rate changes that are perceived as stumbling blocks to regional integration and development. Payments for international transactions necessarily involve exchange of currencies, hence the different types of risks such as credit/payment risk and exchange rate risk. The costs and ease with which international transactions are executed depend on the acceptability of the different currencies. Monetary integration becomes important in international economic relations especially in addressing the problems of the multiplicity of currencies and exchange rate regimes that often hinder trade flows between countries. It is obvious that importers will prefer goods and services from a country with less cumbersome payments systems devoid of exchange rate risk. This is more so with the current wave of globalization.It revealed that, While various instruments such as bills of exchange, letters of credit, etc., have been designed and are widely used to minimize credit and payment risks, monetary integration is most suitable for addressing currency convertibility and exchange rate risk. Indeed, monetary integration, by promoting policy stability, promotes economic growth. It was also discovered that, Lack of currency convertibility contributes to the high cost of transactions in the sub-region as it costs money (and time and other resources) to exchange one currency for another. This is compounded by the international payments system in ECOWAS, which is unnecessarily cumbersome. Indeed, it has been reported that payments for intra-regional goods and services often pass through convertible currencies. It is on this note, the paper look at the general assessment of the policy; it prospects , challenges and some policy implementations which includes but not limited were made; For the project to be implemented, ten convergence criteria, set out by the West African Monetary Institute (WAMI), must be met, including a single a digit inflation rate at the end of each year, a fiscal deficit of no more than 4 percent of the GDP, a central bank deficit-financing of not more than 10 percent of the previous year's tax revenues and a gross external reserves that can give import cover for a minimum of three months and among others.

Keywords:

ECOWAS, Single Currency, West Africa, Region

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