On June 11, 2019, during a meeting held in Abuja, the federal capital of Nigeria, the fifteen members of the Economic Community of West African States (ECOWAS) decided to coin – most likely within 2020 – a new African currency, whose name has already been chosen: “ECO”.
The fifteen States of ECOWAS – the association that deals above all with part of the implementation of the CFA Franc – are the following: Benin, Togo, Burkina Faso, Cap-Vert, Ivory Coast, Gambia, Ghana, Guinea, Guinea-Bissau and Liberia, which founded ECOWAS in 1964. Later, with the further definition of the Lagos Treaty in 1975, also Mali, Niger, Nigeria, Senegal and Sierra Leone joined it.
It should be noted that while Mauritania withdrew from ECOWAS in 2000, since 2017 the Alawite Kingdom of Morocco has officially requested to join.
However the “ECO” project, which has been lasting – at least programmatically -since 2015 and much echoes the “EURO” project, was born within a more restricted association of States than ECOWAS, namely the West African Monetary Zone (WAMZ), which is composed of Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone.
As can be seen, said States also belong to ECOWAS, but they intend to reach an economic and monetary union very similar to the EU’s, considering that their economies are less different than those of the whole group of countries belonging to ECOWAS.
It should be recalled that the ECO launch has been postponed as early as 1983 and is currently expected to take place in 2020, but again only on paper.
Using an old formula of summer media jargon, France defines it as a “sea snake”, but we must always be very careful about oversimplifications and low esteem for friends and foes.
Hence, certainly eight ECOWAS countries shall abandon the CFA Franc, while the other seven countries their national currency.
As the final communiqué of the last meeting held by the fifteen Member States, a “gradual approach” is required for ECO, starting from those countries that show a more evident “level of convergence”.
As we all know, in the case of the EU and its Euro, the convergence criteria were price stability – which is seen as the only sign of inflation, although we do not know to what extent this idea is correct – and “healthy and sustainable” public finance, which means nothing but, within the EU, means a deficit not exceeding 3% of GDP and public debt not higher than 60% of GDP.
From this viewpoint, things are not going very well in Africa.
Africa’s debt has just slightly exceeded 100 billion euros, after Ghana recently taking out a 2.6 billion Euro-denominated loan, in one fell swoop.
In 2018 alone, African countries reached a total debt of 27.1 billion euros, but in 2017 Egypt, Ghana and Benin had borrowed 7.6 billion euros.
Nigeria will reach 17.6 billion euros of debt at the end of this year.
Ten African countries have already issued Eurobonds and there will soon be 21 of them.
It is equally true, however, that the African countries’ debt-to-GDP ratio is on average 53%, while in the 1990s and in the first decade of 2000 it had reached 90-100%.
The obvious reasons underlying the recent increase in the African countries’ Euro-denominated (and dollar-denominated) debt are the following: the consequences of the global financial crisis and the structural decrease in the price of raw materials.
Moreover, considering the very low interest level in the United States and Europe, many investors have also begun to operate in Africa.
Currently Egypt is the most indebted country, with a total of 25.5 billion euros.
It is followed by South Africa (18.9 billion euros), Nigeria (11.2 billion), Ghana (7.8 billion), Ivory Coast (7.2 billion), Angola (5 billion), Kenya (4.8 billion), Morocco (4.5 billion), Senegal (4 billion) and, finally, Zambia with only 3 billion euros.
The analysts of international banks predict that, in the future, the Euro- and dollar-denominated debt will not be a problem for African countries.
Quite the reverse. According to the World Bank, the debt-to-GDP ratio is expected to fall by up to 43%, on average, in all major African countries.
The worst standard in terms of share of Eurobonds on total debt is Senegal (15.5%), while Tunisia remains the best standard, with 6.3 billion euros of debt issued through Eurobonds.
As can be easily imagined, other variables are the cost of debt service, which has doubled in two years up to reaching 10%, and the uncertainty of the barrel price on oil markets, considering that all these countries, except Nigeria, are net oil importers.
Therefore, it is certainly not possible to talk about “sustainable” finance, even though many ECOWAS countries have a debt-to-GDP ratio that currently make us envious.
As is well-know, also the exchange rate stability – required for entering the Euro area – is one of the primary “convergence” criteria.
A 6.3% average annual GDP growth is expected for the 15-member African association, considering the expansion of oil extraction in Ivory Coast, Sierra Leone, Burkina Faso and Ghana, while fiscal stability -which is, on average, about 1.7% higher in 2019 – is acceptable.
Hence, if we apply the usual Euro criteria, the new ECO currency appears very difficult, but not impossible, to be created – at least in the long run.
ECOWAS has repeatedly advocated its single currency project: it was initially theorized as early as 1983, then again in 2000 and finally in 2003. As already seen, currently there is much talk about 2020 as the possible date for its entry into force.
Certainly there is already an agreement between ECOWAS countries for the abolition of travel permits and many of the fifteen Member States are entertaining the idea of economic and productive integration projects.
Nevertheless, as far as the budget deficit convergence is concerned, only five countries, namely Cap-Vert, Ivory Coast, Guinea, Senegal and Togo can currently comply with the single African currency project, since they record a budget deficit not higher than 4% and an inflation rate not exceeding 5%.
Hence we cannot rule out that there will be convergence in reasonable time, but it is unlikely it will happen by the end of 2020.
Moreover, the levels of development in the fifteen Member States are very different.
It is impossible to even out the differences in the levels of debt, interest rates and public debt in the short term, considering that the share of manufacturing in Africa is decreasing and the economies that operate on raw materials have always been particularly inelastic.
Furthermore, Nigeria alone is worth 67% of the whole ECOWAS GDP – hence the ECO would ultimately be an enlarged Naira.
With the same problems we have in Europe, with a Euro which is actually an enlarged German Mark.
The inflation rates range from 27% in Liberia to 11% in Nigeria, with Senegal and Ivory Coast recording a 1% “European-style” inflation rate.
Certainly the CFA Franc is a “colonial” instrument, but it has anyway ensured a monetary stability and a strength in trade that the various currencies of the former French colonies could not have achieved by themselves.
It should be recalled that the mechanism of the CFA Franc, envisages that the Member States must currently deposit 50% of their external reserves into an account with the French Treasury.
However, the Euro problem must be avoided, i.e. the fact it cannot avoid asymmetric shocks.
The Euro is a currency which is above all based on a fixed exchange rate agreement.
We should also consider the adjustments made by Nigeria in 2016-and, indeed the inflation rates of the various ECOWAS countries are stable, but not homogeneous.
They range from 11% in Nigeria to 1% in Senegal.
Between 2000 and 2016, Ghana had an inflation rate fluctuating around 16.92%.
The fact is that all ECOWAS countries, as well as the other African States, are net importers.
Furthermore the West African countries do not primarily trade among themselves.
While single currencies are designed and made mainly to stimulate trade, this is certainly not the case.
The CFA Franc, however, was a way of making the former French colonies geopolitically and financially homogeneous, with a view to uniting them against Nigeria – the outpost of British (and US) interests in sub-Saharan Africa.
Furthermore, none of the ECOWAS governments wants to transfer financial or political power to Nigeria, nor is the latter interested in transferring decision-making power to allied countries, which are much smaller and less globally important.
The region could be better integrated not with a currency -thus avoiding the dangerous rush that characterized the Euro entry into force – but with a series of common infrastructure projects or with the lifting of tariff and non-tariff barriers.
The largest trading partner of sub-Saharan Africa, namely the EU – with which the ECO would certainly work very well -currently records a level of trade with the ECOWAS region equal to 37.8%.
Nigeria exports only 2.3% to the other African partners and imports less than 0.5%.
However, if ECO is put in place, this will be made possible thanks to a possible anchorage to the Chinese yuan.
This would avoid excessive fluctuations – probable for the new currency – but would create ECOWAS African economies’ greater dependence on the Chinese finance and production systems than already recorded so far.
Certainly it would be a way of definitively anchoring Africa to the Chinese economy.
From 2005 to 2018, Chinese investment increased everywhere, but in Africa it totalled 125 billion US dollars.
Africa is currently the third global target of Chinese investment.
17% of said Chinese investment has been targeted to Nigeria and its ECOWAS “neighbours”, especially to railways and other infrastructure.
Moreover, in 1994, thanks to its liquidity injections China rescued the African wages from the CFA Franc devaluation, which had halved all incomes.
Those who govern Africa will control globalization. India is now the second major investor in Africa, after China. The EU takes upon itself the disasters of African globalization, but not the dividends.
Whoever makes mistakes has to pay. There has not been a EU policy that has “interpreted” Africa intelligently, but only as a point of arrival for ever less significant “aid”.
Therefore China will bend the African economic development to its geostrategic aims and designs.
China offers interest rates on loans that are almost seven times lower than Western markets, which never reason in geopolitical terms, as instead they should do.
Pandemic: A Challenge for the Globalization
The vaccination process across the world is underway, and after almost complete vaccination of the world population, we will see a post-pandemic world that is going to be different from the pre-pandemic world, especially in the context of Globalization and the role of states in the world.
In the post-1980 world, Globalization became the prevailing phenomenon that impacted the whole world and its functioning. Whether it was the realm of society, power politics, or economics of the world, whether, in the context of domestic affairs or global affairs, Globalization has been unavoidable and un-resistible until the ongoing pandemic has erupted after which many changes have been brought to the world. Social distancing and travel restrictions protocols posed challenges but that is temporary, but what offered concerns to the policymakers and businesses of the world that how fragile the functioning of the global economy is, and how the economies of states are depending on this fragile mechanism.
The interdependence and interconnectedness between national economies as well as multinational corporations and organizations in the global economy are in such a way that if only a single link breaks down, a series of collapses will occur. This has happened during the pandemic.
When China was hit by the pandemic, two-third of its economy stopped working, consequently, the world witnessed a sharp decline in the global supply. The same happened when the pandemic was at its peak in the West. In this way, the worst impact on the global economy was in the form of a major recession, depriving people of employment, and increasing poverty, across the world as no nation could remain unaffected.
When such pandemics exploded at a place somewhere before the era of Globalization, other parts of the world were unaffected economically. Another point of pondering is the fact that in the case of China it is not because of the involvement of Chinese firms in the rest of the world but because global companies have some of their production lines installed in China. Globalization lets it happen. This is well explained by famous sociologist Anthony Giddens, who says that it is the major characteristic of Globalization that distant localities are linked with each other in such a way that one event at a place shapes events at other places.
Notice that if it is thought that virus pandemics erupt once in a lifetime and therefore most of the time Globalization will be dominating and decisive, it is not the case. The future of Globalization was at stake in the recent crisis when both the economic giants China and the USA engaged in a trade dispute because of which world economy faced contraction in its GDP which would have been turned into a global economic recession if the trade war continued.
Like pandemic exposed the vulnerability in the economic structure of Globalization, so it did by revealing the dangers on the political front. In Globalization, governments were subjected to cooperation which reduced the political tensions between them, however, pandemic reactivated their political motives, which means that in case of an emergency governments failed to cooperate. Such a severe blame game was started when some countries lashed out at China, calling it responsible for the global spread of the pandemic, while China refused all accusations and blamed the US for politicizing the health crisis. The political tussle made faces at Globalization.
International and regional organizations which are the key aspects of Globalization failed too. The World Health Organization is the case in this regard that how it crumbled. It not only faced criticism but the US even withdrew its financial support from it. Likewise, other international and regional organizations could not maintain cooperation among nations. In this way, Globalization could not even handle the crisis adequately.
Globalization brags about free trade but now people are asking the question that what is the benefit of free trade if it cannot even function when it is needed the most. When there was more need for cooperation between governments, Globalization failed again and it was also exposed in the role of organizations. That’s why one may argue that the post-pandemic world would be the era of de-globalization and states would strive to gain more and more power as they do not want to rely only on Globalization anymore. Likewise, people are now more careful in their spending, while corporations are now more conscious about their dependence on Globalization, therefore, they are going for precautionary measures.
Post Pandemic Recovery: The Rise of the Alpha Dreamers
There are five billion alpha dreamers across the world; why because they are connected globally with all sorts of devices, more so ever than any other time in the history of civilization, and secondly, interacting at 1000 times faster than any invasions of the largest marching armies ever assembled in history. They select and they choose; they browse, click and chat, they like and dislike. All ages and all cultures, opinionated or neutral, but informed they are, evermore than any other civilization ever existed on the planet. Who are they and what are they after?
First, observe, how their silent whispers are still inaudible in the rotundas of power, notice how their hidden power is sweeping the global mind, sharing something never ever dreamt before. As, during the First Word War, symbolized by digging rotten trenches until death or the Second World War symbolized by senseless revengeful carpet-bombings all organized under deep silent agenda. Now in a new differently connected world of today, the common voice of the common person struggling for common good becoming the loudest whisper starts to emerge.
Today, if they all agree to flush the toilets simultaneously around the world it will dry out an ocean the same afternoon. All such mathematics is based on large numbers, few billions here or few billions there, the real power still deeply hidden on 24x7x365 free access culture keeping global dialogue live and global mindshare active. Political punditry ignoring such power seems only waiting for a big slap on the face when dealing with the next coming elections. Study the rise and fall of leadership, scheduled over next 500 days, the outcomes of next 100 national elections across the world. What is happening in your nations, who is vocal and who is silent, but why? The major shifts are on the way.
This is all about five-billion-minds active on global-circuitry learning live-facts in real-time.
Who are they and what are they after? Why the name ‘alpha’ because they are the first largest group ever assembled since Homo erectus? Why the name ‘dreamers’ because the majority are simple common people with simple common dreams of seeking common good and humankind going forward.Alpha dreamers are chasing a better world, not because they have a united cultish agenda but because they treat themselves as ordinary humans and respect humanity. In a world wrapped with fakery, this is a simple goal of a common person, when this multiplied by five billion it automatically becomes an unimagined force. Truth is the shield, diversity and tolerance the only platform left. The world of seek and destroy doctrine will eventually end. The claims to any exceptionalism unless demonstrated in common good is just fakery and tyranny.
Is shutting down the world’s electricity or snatching seven billion phones the next calamity?
Such moves will only prove the panic in rotundas; it is all about courage to face the mirror and deal with the truth, why many billions of people are challenged on issues of humanity, and why such issues come to the forefront. The emergence of a new world is now challenging political agenda, global policies, economic goals, educational values, environments, rights, diversity and tolerance all tested to pursue common good. The five billion connected alpha dreamers will not be fooled all the time. Global public opinion is a simple opinion of social-justice on any street, in any town; village or city, now connected as a multi-billion force.
The elite practitioners of the fine art of image positioning and election punditry always understood that sometimes a one single picture at a wrong or right time decides the election winner. Today when a silent bullet kills a person in the dark of the night, it sometimes shoots billion minds equally when billion images ricochet around the globe. Today, dark alleys and hidden torture chambers becoming live broadcast shows on social media uprooting leaderships, shattering ideologies and exposing false narrative. The tragedy hidden in denying the power of connected global populace and accepting short-fuse of superiority while ignoring common global connectivity. The credibility of the media is gone on the streets of the world, so are the institutions and most leadership. Will this dark silent vacuum filled by the global whisper strong enough to burst eardrums of leadership? Will it make them come together on a new page and listen deeply?
Smart leadership will not survive just by manipulation; hot notions of controlling masses with AI centric facial recognition and profiling will result in more confusion, but with deeper understanding of truthful dialogue with citizenry to downstream real vision of creating grassroots-prosperity will save leadership. Change without pain is not a change rather just a theme based public relation campaign, as if upskilling midsize economies without measuring current levels of lingering competencies is not going forward but in reality sliding backward in slow motion. No single country in the world is either capable or skilled enough to solve all global problems, nor is any single nation exclusive enough to claim any exclusive superiority in humankind. However, each single country is very capable to play a big positive role in the global arena and contribute in big ways with diversity, tolerance and peace. Everyone is important and everyone is needed.
Political leaders with one ear to the ground to listen to public opinion NOW need the other ear also on the planet to listen to the global public opinion and to demonstrate courage to face the music and demonstrate skills to articulate on global issues. Study more on Google.
The rest is easy
Bitcoin Legalization In El Salvador: Heading Towards A Crypto-Friendly Regime
Cryptocurrencies are surely one of the hotly debated topics across the globe. There’s always an ambiguity surrounding the usage and permissibility of crypto assets. Various government entities fear that crypto holds the tremendous power to disrupt the financial and banking sector & it will surely replace the existing financial systems present across the globe. This is 21st century & with the growing technological advancements, the world is rapidly getting acclimatized into the domain of crypto currencies. With this move, some government entities are also changing their perception of cryptocurrencies. The recent legalization of bitcoin in El Salvador can be construed as a prime example of this which apparently came as good news for crypto enthusiasts. The news made El Salvador appearing at the forefront of leading international news channels and websites. By this move it became the first ever country across the globe to legalize any cryptocurrency. The step came after the El Salvador’s President Nayib Bukele announced via twitter that bitcoin will now be accepted as a legal tender across the nation. Earlier in the bitcoin conference 2021 held in Miami, the President gave subtle hints of passing a bitcoin legalization bill. From using bitcoin/paypal hashtags to modifying his twitter profile image depicting red lazer eyes (a trendy way to used in internet by crypto enthusiasts to exhibit their support for crypto), the President’s fascination with bitcoin can be construed prominently. The congress passed the bill on 9th June 2021 by the margin of 62 votes out of 84 favoring for legalization apparently termed by the President as what is called a supermajority. The successful execution and implementation of this bill will make way for the proper legalization of bitcoin. The prominent excerpt from the bill said – “The purpose of this law is to regulate bitcoin as unrestricted legal tender with liberating power, unlimited in any transaction, and to any title that public or private natural or legal persons require carrying out.” To further promote the acceptance of bitcoin the president also made it clear that persons holding bitcoin or persons investing in bitcoin in El Salvador will be offered citizenship of the country.
This pro-active stance by the El Salvador government was very much applauded by the industry experts and crypto enthusiasts around the globe. One of the reasons why the congress took such a drastic step is that El Salvador doesn’t have any currency of its own. Up till now, it has been using the United States Dollar as official currency across the nation. With this move the dependence of nation on US Dollar is likely to be diminished. Nevertheless, the President made it clear that US Dollar would be used for accounting and official purposes. As a matter of fact, the El Salvador government also promised to provide training and necessary guidance to the fellow citizens on the usage and holding of bitcoin. For the purpose of creating a robust bitcoin economy, the government will take assistance from newly launched home country based payment service provider platform Strike. Jack Mullers, the founder and CEO of Strike said – “Adopting a natively digital currency as legal tender provides El Salvador the most secure, efficient and globally integrated open payments network in the world.” The announcement of this legalization increased the value of bitcoin which faced a sharp decrease after the infamous crypto market crash few weeks back.
Apart from authorizing a potential future currency, the legalization will have a plethora of benefits for the country as a whole. For instance, it will boost the overall economy, create new job opportunities for citizens, facilitate faster remittances, help in increasing the low banking penetration rate among others, enable citizens of El Salvador living abroad to send tokens into their home country among others and permit the government to officially own bitcoins among others. It will also make El Salvador future proof from the crypto perspective as there is a strong possibility that crypto market will takeover the traditional banking and financial systems of the world in near future. When formally enacted, the citizens will be able to pay taxes in bitcoins, the price of commodities will be displayed in bitcoin, and almost everything related to price can be calculated from bitcoin terms apart from creating a alternative currency working simultaneously along with US Dollar.
The legalization of bitcoin in El Salvador also holds the potential to make a remarkable shift in crypto perspective by other Latin American countries given the fact that the region may become a hub for crypto powered finance. Observing this move many Latin American nations have raised a voice to show support for this move. Countries like Argentina, Brazil, Panama, Paraguay and Mexico have given signs of making a similar move. The top-notch politicians fo the above mentioned countries have already commenced the discussion for providing legal backing to crypto assets.
But taking such a big leap of faith won’t give fruitful results unless & until there’s a strong backing and support provided to it. To realize this bitcoin powered project, the government officials have made it absolutely clear that the geothermal energy will be used for mining bitcoins considering the fact that the country has large repositories of volcanoes. The state-owned geothermal electric company LaGeo will work in assistance with the government officials. Since the President is aware of the ill effects of bitcoin mining on the environment, only the renewable energy source would be used for this project. As per the estimates the carbon dioxide emissions from worldwide bitcoin mining industry has reached a whopping 60 million tonnes, equal to that of exhaust fumes from 9 million cars. Hence keeping in mind the environmental concern, the President gave assurance via twitter that the nations geothermal energy exclusively will be used. He also took to twitter to show his followers about the zero emission bitcoin mining process being tested by the engineers.
A major obstacle in this project comes from the reluctancy of International Monetary Fund (IMF) with this move which highlights the tensed relations between El Salvador and IMF citing the intricacies in economic and financial conditions currently prevailing in the nation. The IMF is of the view that providing legal backing to bitcoin will make El Salvador a safe haven for tax frauds and money laundering. Since bitcoin doesn’t involve tax on capital gains, it will surely pave a way for wealthy individuals and organizations to save themselves from paying heavy taxes. Also, it may facilitate laundering of billions of dollars by criminal enterprises and drug trafficking organizations. Although IMF earlier gave green signal to this move but lately it has been skeptical about the aftereffects of bitcoin legalization.
All in all, what future holds for crypto market is hard to comprehend. However, the scale at which crypto usage is growing, one can easily anticipate that the 2021-30 decade will observe a boom in the crypto financial market. Considering the disruptive nature, potential and audacity of cryptocurrencies, it will definitely replace the traditional financial systems present across the globe. Even then nothing can be predicted with 100% surety. Being a crypto enthusiast, I hope the world adopts a crypto-friendly policy so as to make sure crypto market is being regulated by regulatory bodies to ensure the authentic, safe and secure environment for crypto investors. Meanwhile, we can speculate, make bets and invest on various crypto assets based on our own perceptions and calculations. Till then let’s enjoy the existing regime of crypto around the world.
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