Mali's Reentry Into Franc Zone Implications for West Africa
Emmanuel A. Annor
"Those who might point to Europe as a region where individual currencies have survived ought to realize that West Africa lacks the industrial and agricultural base for a Dalasi or Cedi to become a convertible currency. And hasn't the European Economic Community instituted its own unit of currency?”One significant event that happened in West Africa toward the end of 1983 which received very little attention was Mali's re-entry into the Franc zone. The event is significant not because it underscored the maturity of the military administrators in Mali, but because it strengthens the notion that despite the familiar West African contempt for colonial-inherited institutions, certain critical institutions function better when banded together in unions.
In the light of the December 31st, 1983 military takeover in Nigeria, whose genesis has not surprisingly been traced to economics, the Malian event becomes even more poignant. If the "almighty" Naira couldn't hold its own, then it does not make sense for the Dalasi to try to stand in isolation; in fact, it has just been reported that the Dalasi has been devalued.
The coup in Nigeria highlights the fact that not even Nigeria can stand alone when it comes to economics. As the implementation of parts of the ECOWAS provisions, particularly the clause on the free movement of people, has shown, the ECOWAS will remain a mere ideal if West African leaders do not unify their currencies.
Isn't it ridiculous that largely because of currency exchange problems it is harder to travel from one West African country to the next than to travel throughout Europe? And yet we all hypocritically pay lip service to the "traditional" African brotherhood and hospitality!
It is paradoxical that, while Kwame Nkrumah worked hard to bring about African Unity, he also anxiously dismantled the critical institutions that could have served as the practical building blocks for unity. For example, he led the way to the breakup of the West African Cocoa Research Institute (WACRI), and the West African Court of Appeals, and the West African Currency Board. The breakup gave birth to the Cedi, the Nigerian Pound (later renamed Naira), the Leone, and Dalasi. The fact all too obvious to most West Africans that most of these currencies are now not worth the papers they are printed on does not bear repeating. It is in the light of this that I propose we have two major currency blocks, the CFA and the one I have in mind.
The idea of two major currency blocks (minus the Liberian dollar, of course) is not a new one. The West African Currency Board used to work well during the colonial period. The underlying rationale is simple: since we all went our several currency-ways, Ghana has changed the Cedi more than three times, and so has Nigeria. The Leone is squeaking under harsh economic stress. The motivation for all these changes has been predicated on the false assumption that change per se would improve the economies of the countries involved.
Observer predated the Acheampong- engineered currency change in Ghana. The belief, inspired by the German example during her period of hyperinflation, was that the change in currency would mop up the excess liquidity in the economy. It is hard to tell whether the SMC of Ghana derived its inspiration from that article, but the change was so brusque and panic ridden because of the short notice given for the transition that not only did many people, especially those in rural areas, lose money, but it also benefited bank managers who cashed in on the pandemonium.
The time is now ripe for all those who espouse unity to do something concrete about uniting. I suggest that a Task Force on Currency Unification be set up comprising representatives from Ghana, Nigeria and Sierra Leone to study the implications of adopting one common currency. The Task Force's mandate would include a pronounceable name for the units of currency. We should not even be ashamed to revert to the West African Pound, if that will make things easier.
This Task Force need not supercede the current efforts being made regarding the ECOWAS unit of exchange. I deliberately left out Gambia because it is easier for her to join the Franc zone now that it is in confederation with Senegal. Liberia uses the "almighty" U.S. dollar and therefore appears not to have currency problems. Guinea, after these past 26 years of hardship, may perhaps be readmitted into the Franc zone.
The work of the Task Force on Currency Unification should include a recommendation for a reasonable period of transition during which the old currencies would be allowed to be legal tender side by side with the new ones, over a period of about two years, by which time all the old notes will have been retired into the vaults and In fact, a 1975 article in the Legon reshredded. The coppers and silvers could be remelted and reminted.
There would be several advantages to such a project. First, it would be more cost effective to have a West African mint and Security Printing, with tight security from the participating countries, which would cut down the present cost of printing our currencies abroad.
Second, a common institute to train our future monetarists and financial wizards would be easy to establish, since research will be concentrated on the region and the critical problems arising from the unification addressed. Third, it would facilitate trade and make our international debt more manageable. And finally, we could have a West African stock market to generate investment money for our economies. These possibilities, however, would not be unaccompanied by complications.
Many problems, both directly and indirectly related to human error, are bound to rear their ugly heads. The first of such problems might stem from the attitudes of the various nationals. particularly the "experts". These individuals have been known in the past to try to abuse their influence based on either the potential wealth of clients, their countries or unwarranted prejudices.
The case of the African Development Bank, in which Dr. Kwame Donkor Fodjour's demise was engineered by his Nigerian rivals because he had dared open up the bank for non-African investors is a case in point. (Ironically it was this policy, rejected by the Bank's Board of Directors, that is being pursued now.)
Was it not nationalistic feelings that broke up the former unions? These questions would have to be critically addressed, and mature leadership with a foresight of the larger interest, nurtured so that the problem of territory-building does not become too much of an impediment. Technical problems of banking, security, counterfeiting, etc. are real but surmountable if only we have the will to overcome them. We would not have to look too far for models, since the Franc zone has thrived for well over three decades.
Those who might point to Europe as a region where individual currencies have survived ought to realize that West Africa lacks the industrial and agricultural base for a Dalasi or Cedi to become a convertible currency. And hasn't the European Economic dinates. Community instituted its own unit of currency?
Perhaps it is a good thing that we have military regimes in Ghana and Nigeria, for military regimes are famous for making "quick" decisions, with "immediate effect." But the kind of quick decision advocated here is not the characteristic rush for magic solutions to our endemic economic woes, but rather one which calls for initiating the setting up of a task force to study the project's feasibility. That Ghana and Upper Volta have recently hinted at joining their currencies underscores the need for a serious debate on the issue.
I believe that the noble aims of the ECOWAS could be realized if we start to sort out the basic institutional forms that can foster real unity. An ECOWAS unit of currency, modelled along the EEC's, in my opinion, is not the answer. It can be useful only to the extent that we have two strong currency blocks, the CFA and the potential one being proposed here.
After a quarter of a century of high dramatics, kicking, and screaming, we must now sit down to the hard work of thinking and building. The imperialist and colonialist guilt-sense is dying off, or has died off altogether, with the passing of the first generation colonial administrators who felt obligated to their former colonies. If after these years we still want to be treated like babies, then we are only kidding ourselves.
