After the 1963 conference that had 32 African countries agree to Integrate politically and economically to abolish the problems caused by colonialism and neo-colonialism. There were two opposing school of thought. One of school supported the idea of an educational, economic and political integration, while the other was indifference. And as a result, the idea was short lived. The causes of the major problems causing stagnation towards the growth of Africa in general are numerous.
Therefore, the aim of this write up is to reflect on the economic issues. Before now, foreign policies imposed on Africa when participating in the foreign market has never been favorable, basically because of the weak currencies all the African countries possess. Developing countries in Africa harvest cheap agricultural products but are unable to export as much as expected because of the high import tariffs from the countries under the G12. It hard for a single African country with a low per capital income to compete with a European country that is protected by the European Union when it comes to trading. Technically, the European Union operates on a single currency policy in order to combine resources, uproot trading barrier between them and above all stabilize their currency. Today, the Euro currency is used by 13 countries under the EU and it’s the second strongest currency in the world. As far as Africa is concern, one of the major issues that should be attended to is the economic growth and currencies that we use to trade with superpowers like the U.S and the EU. For example, the since the U.S dollars was equated to the gold standard after the second world war, many countries felt safer to peg their currency to the dollar. However, there had been ups and downs with the dollar, but today, more countries in Africa still make it stronger as they keep buying U.S investment, and government bonds in dollars. In 2003, the ECOWAS proposed a single currency policy like the Euros. A treaty was also signed in Abuja, Nigeria. The treaty provides for the creation of an African Economic Community, an African Central Bank and Milkiewicz,, Masson. “Is it beneficial for the African Union to introduce a Common Currency?.” grin.com. www.grim.com, 4 Jan. 2003. Web. 9 Jan. 2022. At present, most of the countries have not signed the contract, some countries have formed their own currency unions, like East Africa, some ask for a currency later and some use currencies from other countries, like for instance in several African countries, they spend the South African Rand. Now it is still a hypothetical plan. But it gives us important insight. It seems like the African countries want to change something on their economic situation and might have seen that they were left out of the benefits of globalization.
What are the huge benefits of a single currency?
There are some advantages that a common currency has which can benefit individual, businesses, and the general economy.
They’re as follows
· It can cause higher currency stability as a currency used in a larger zone is more credible,
· Less speculation is expected, and exporters can project future markets better and in turn more foreign investors are attracted and more jobs are created.
· A single African currency will make it easier, cheaper and safer for businesses to buy and sell within all African countries and to trade with the rest of the world
· It can create a more efficient financial market.
· It can improve economic stability.
· There would begin to be a significant sign of an African identity.
· It can create a global influence for Africa in general.
The Disadvantages of a single currency.
· Rigid monetary policy – A single monetary policy might not fit into a local economic condition. It might occur when some countries are prospering economically, and some are not. And it might be almost impossible to address this issue, because countries that are prospering might not want to tamper with interest rate to help the low growing country. Unfortunately, interest rates cannot be simultaneously raised in the high growth country and lowered in the low growth country when they have a single currency.
· There might be a Bias towards countries with stronger currency. For example, in the Eu, most of the countries pegged their exchange rate to Germany’s standard because of its large economy. Therefore, making her more influential in the EU policy making decision.
In closing, whether a single monetary policy is the solution to Africa’s economic problem or not, the bottom line is that action towards this proposal can bring out the sense in the whole idea.
Reference
https://www.grin.com/document/193726
Reference
https://www.grin.com/document/193726
