The European Union and monetary integration in West Africa. ZEI Discussion Paper No. C206, 2011

Uche., Chibuike (2011) The European Union and monetary integration in West Africa. ZEI Discussion Paper No. C206, 2011. [Discussion Paper]

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Abstract

This paper argues that developments in Europe have been the most important variable in monetary integration in West Africa. It shows how monetary integration in West Africa has historically been influenced by two colonial powers: Britain and France and the state of the relationship between these two European countries. The consequence of the above is that Britain and France have become major stakeholders in West Africa and failure to consult them in monetary integration matters in the region has always led to suboptimal results in the integration process. The modest monetary integration success that has been achieved by the Francophone West African countries for instance have been extensively aided by France which has acted as the agency of restraint to the arrangement. On the other hand ECOWAS wide regional integration arrangements have been mainly unsuccessful because of the sometimes divergent interests of France and Britain in the region. The consequence is that the idea of a unified West African monetary area has always failed to gain the support of the two powerful European stakeholders. Specifically, neither Britain nor France is willing to act as an agency of restraint for the entire West Africa. The absence of an agency of restraint also explains the inability of Nigeria and Ghana to achieve the establishment of a second monetary zone in the region. The new program, unfortunately, has provided no institutional framework for dealing with outside stakeholders. Despite the above shortcomings, the paper argues that the changing political landscape in Europe may alter the nature of incentives behind the interest of foreign stakeholders in the region. This in itself could create new opportunities for a region wide monetary integration program in West Africa. To achieve its aim, this paper, including the current introductory section (Part One), is divided into seven parts. Part Two traces the origins of monetary integration in the West African sub-region while Part Three critiques the post-independence ECOWAS wide monetary integration programs in the sub region. Part Four analyses the operations of the monetary integration program in post independence Francophone West Africa while Part Five examines the origins and operational modalities of the Second Monetary Zone. Part Six attempts an analysis of the future direction and opportunities for an ECOWAS-wide monetary integration Program while Part Seven concludes the paper.

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