The Pros and Cons of a Monetary Union, the Possibility of Anglophone West African States to Achieve a Monetary Union and the Level of Preparedness of Anglophone West African States to Meet the Convergence Criteria

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Introduction and Background

One of the aims for establishing The Economic Community of West African States (ECOWAS) in 1975 was to form a Monetary Union among its member states. (WAMZ) Nevertheless, that seems to have eluded ECOWAS after 25 years of existence. However, the Francophone West African countries achieved a Monetary Union in 1994. (WAMZ) In the year 2000, Ghana and Nigeria also led the formation of another Monetary Union, which has not come into effect yet. This new Monetary Union will comprise of Anglophone West African countries so it would be easy to combine it with the Anglophone countries later, than to merge all member states of ECOWAS at once. (WAMZ) The aspirations of introducing a single currency for ECOWAS states has not been achieved for a long time now due to lack of economic convergence of the countries involved. This paper seeks to analyze the pros and cons of a Monetary Union, the possibility of Anglophone West African States to achieve a Monetary Union and the level of preparedness of Anglophone West African States to meet the convergence criteria. The benefits and costs of creating a Monetary Union

One of the main tasks of the central bank of the Monetary Union will be controlling of inflation rate by changing the interest rate from time to time. The Central Bank for the Monetary Union will set one interest rate for all member states. The interest rate may be good for some countries and harmful to other countries. This is because an interest rate of

5% maybe very good for a country with a booming business but harmful to smaller economies. Therefore, what is good for the West African Monetary Zone as whole may not be good for every member country. (BBC, 1999) •Banks in Ghana, financial institutions and the Ghana Stock exchange market would have to change their financial systems. Retail banks would also have to change their automated teller machines (ATM). (BBC, 1999) •Firms would also have to change their...
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