¶ … West African States to Employ a Single Currency as Demonstated in the Euro Zone
Potential for the West African States to Employ a Single Currency as Demonstrated in the Euro Zone
In ancient era, West Africa was known to conduct business activities and trade amongst them. The trade was among the empires within the region. The system of trade was mainly barter trade. This type of trade was based on exchange of goods for goods. The true value of the exchange was difficult to determine to the extent that some goods were undervalued in the process of exchange. Empires exchanged food crops, animal products, artistic materials, and other trade items. The trade in the region enabled the development of empires that grew even stronger. In the contemporary world, the paper and coin era emerged. States introduced their own currencies that are usually measured in relation to the American dollar. States formed economic corporations such as ECOWAS to help promote the level of trade and business activities within the West African region. Members of the states belonging to the corporations are allowed to move freely between these countries in the process of conducting business.
The exchange between the countries from West Africa region benefits the member states differently depending on the strength of their currency in the international market. This makes countries with stronger currency to benefit at the expense of the weaker states with respect to currency value. To ensure that the problem that existed both in the ancient and contemporary societies is minimized, the currency needs to be streamlined to equal value. Single currency should be introduced in the region to provide equity in the benefits accorded because of trade. Single currency will enhance the process of trade and business activities as individuals will not be required to exchange currencies into the currencies of the state where business is being conducted. This will improve the condition of movement across the states in the process of trade. With introduction of single currency in the region, the volume of trade will increase. The single currency will also enhance the living conditions of citizens of the member state.
Preliminary Review of Literature
In the contemporary society, in relation to the money market, large political entities subscribes to different exchange rates while smaller states subscribes to single currency, (Edwards, 1986, pg 333). Debates have been ongoing on the importance of fixed against flexible currency in the West African region. Since the countries in this part of Africa are considered small states, there should be an emergence of economic entity. The economic corporation should subscribe to single currency to ensure economic stability in the region. According to Edwards, the economic relationship between countries experiencing different currency units will affect the price levels of commodities within those countries. According to a seminar held in Ghana in 2000, some of the West African leaders proposed for the adoption of single currency system that would apply to all ECOWAS members. (Mason & Pattillo, 2004, pg 95). This has been the objective of ECOWAS since its formation and application from 1975.
Adoption of single or common currency among the West African states will ensure common production structures, enhancement of the transfer of factors, flexibility in salary or wages, and improved average prices (Mason & Pattillo, 2001, pg 2). The common currency in the region is factor that must be looked into to promote the economic status of the countries involved. With the development of ECOWAS, there was need to adopt common currency among member states to enhance the regional integration (Oteng, 2006, pg 114). This was the main function of the West African Unit of Account (WAUA). With exception of the export restriction, exchanging currencies within West African states is a nightmare (Lonely, 1986, pg 820).
To curb the existing complication posed against the ECOWAS single monetary policy within the region, there should be an establishment of West African Monetary Zone to ensure the development of common Currency (Adebajo, 2004, pg 61). This program would ensure the introduction of common central bank and common exchange rate within the region. The adoption of the common currency within the West African states is a plan that should have been executed by 2009. Through the ECOWAS Convergence Council, terms of reference in relation to common currency had been revised in 2008 (Gathii, 2011, pg 156). Currency adoption has become essential for the stability of prices and credible commitment. In order to reap the benefits of reduced trade or production cost, Adoption of common currency is crucial in West Africa. This will reduce huge burden cost incurred during exchange of currency among the states (Yehoue, 2004, pg 3).
Transaction within West African region...
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