West African Countries Monetary Integration Study

West African area is divided into 2 sub regions: French speaking countries which are Benin, Burkina Faso, Cote d'ivoire, and guinea, Mali, Niger, Senegal, Togo and non French speaking countries among which there are Nigeria, sierra Leone, cap Verde, guinea Bissau, Ghana, Gambia and Liberia. The two sub regions show differences in their monetary policy and in politics decisions. The French speaking countries have a common central bank which is West African central bank (BCEAO), FCFA franc which is the area's single currency, is launched by its central bank. the currency value is related to euro(1 euro=656 FCFA).on the other side the non French speaking countries have each their own central banks and currencies, they have a relatively stable monetary systems, nevertheless we observe a significant economic development differences between them within this area.On the basis of monetary integration theory this introduced firstly the actual situation of the West African monetary integration and its structure. Since 1975, most of the measures applied in West African countries were in order to establish the West African clearing house that became later monetary management office. The other efforts made in insurance and financial markets, clearly have shown that West African countries have taken all kinds of measures to build a monetary union.In 1994, the franc devaluation of 50% was a proof that action was starting to be taken in this matter. After that, the franc exchange rate became 1 French franc exchanging 100 West African francs. This measure induced macroeconomic and financial stability in the area, thus impulses the franc zone on the track of successful development, In the meantime, the West African monetary union changed into the West African economic and monetary union, its aim is to accelerate economic integration in this area in order to be ready for economic globalization's challenges. This organization represents plays a crucial role in the monetary integration of West African countries, it also promotes economic, monetary and so many other economic factors in both franc and non franc zone. the west African monetary integration' policy is therefore conducted by the west central bank, it is an international institution and it's located in Dakar, Senegal. this institution has a representative office, and in all the member countries it has a branch, and also a representation in Paris.Next, after analyzing the problems that face the West African countries during their monetary integration, this research found out that there are several obstacles during this monetary integration. first, every country's economic structure in this area is single, national economies grow without developing. even if the franc and non franc zone economic growths became obvious nowadays, nevertheless it's foundation remains weak. secondly, the sub region's trade and investment development are still slow, common factors market still backward. even though many trade agreements have been signed in the region and that there are free trade areas in the sub regions, but it's does not reach the European union's level of common goods and factor market's organization, and that's why the west African monetary union's exchange rate system remains incomplete. Third, the financial market is underdeveloped and the banking system is not complete. before their independence, the west African country's financial institutions belonged or were managed by foreign investers. after independence, most of the countries in the area began to undertake national banking policies, either central bank or commercial bank had to follow the government's orders in economic policies .all kinds of decisions were made by the government, from the designation of the board of directors to credit scale. This kind of government interference can be positive in order to construct the countries but it affects the healthy development of the bank itself, it also affects the national resources reasonable allocation. the fourth problem is that countries do not have an organization that have the to overpass the member countries governments, the west African countries still do not have an organization that have an internationalism spirit, that can also sacrificeNational profits in order to gain sub regional profits, an organization that can lay down and carry out monetary and the regional structure's policies, an organization that can coordinate and supervise all the member countries macroeconomic policies, that's why the west African countries lack the motivation to urge all the member countries to coordinate their policies. The fifth problem is difficulty to execute strictly financial discipline. The financial coordination model of West African countries is similar to the European one, it specifies a constant economic indexes or set up a cooperation fund for all the member countries, but because this area's economic underdevelopment and big economic development difference between the member countries, the real execution of their policy cooperation is still not officially spread out.On this basis, this paper suggest that west African countries should carry forward their monetary integration process, and point out that the member countries within the monetary union should make great efforts toward a successful development direction by taking concrete measures: first, the union should establish a closer relationship between the member countries, generally, the more higher the monetary integration degree is ,the more higher member country's profits are, though the more lower their loss is. Enforcing a suitable and diversified strategy for the African economy, will be the aim of West African countries in the future, on the basis of keeping a foothold on natural resources exploitation, they should greatly develop information industries and more other superior industries. second, the west African countries should actively push on the reforms of the financial system and the labor market, the governments should also strictly control foreign debts scale, at the meantime they should have perfect national stock markets and reduce debt risks, from the labor market point of view, the governments must make great efforts to eliminate the labor markets system's obstacles existing between countries and improve labor factor's flexibility and elasticity. third, they should develop financial markets, lift financial restrictions to the outside world, promote the development of the region's inner trade. While developing monetary market, they should commonly make researches on opening capital market especially the stock market, also promote bond transaction network, establish in all the area Payment clearing system. they should strengthen the central bank's cooperation between all the countries in both franc and non franc zones, establish a Transregional west African policy coordinating institution, coordinate all member countries monetary and exchange rate policy, protect the stability of west African area's exchange rate system, fourth, they should handle the relationship between the external scale and the economic structural adjustment, firstly, the actual credit loans should be examined seriously, especially because the country's future and budget depend strongly on it, secondly the complete information about the rearrangement of debts paying promises toward foreign loaners and credit amount services, influences the whole world's liabilities toward the capability of credit calculation, further, the countries should strengthen the system's restrictions and the management perfection, the measures listed above are very essential to highly indebted countries, it can overcome the debt problems basic restrictions, and finally, relying on actions and strategies to stimulate economic growth must depend on macroeconomic management, and that would also stimulate private investment.The west African monetary cooperation is actually in a transition between its first and second phase, the exchange rate phase is a relatively high degree of monetary cooperation. In consideration of the West African economic development level and their monetary crisis experience, the West African monetary integration can only be ahead of its time.