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Financial Sector Failures in Western Africa

Published online by Cambridge University Press:  11 November 2008

Patrick Honohan
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Extract

At a time when radical reforms are being implemented not only in Eastern Europe and Russia, but also in a number of ex-socialist economies in Africa, a review of an earlier wave of relevant financial changes in the post-independence era can be instructive. Previously, currency and banking arrangements were largely equivalent to those of the colonial powers, but in or about 1960 for most states, and as late as 1975 for the ex-Portuguese territories, real choices had to be made, and the ruling régimes chose a variety of quite divergent paths.

Type
Articles
Information
The Journal of Modern African Studies , Volume 31 , Issue 1 , March 1993 , pp. 49 - 65
Copyright
Copyright © Cambridge University Press 1993

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References

1 See Azam, Jean-Paul, ‘Niger and the Naira: some monetary consequences of cross-border trade with Nigeria’, in Chhibber, Ajay and Fischer, Stanley (eds.), Economic Reform in Sub-Saharan Africa (Washington, DC, World Bank, 1991), pp. 66–75.Google Scholar

2 See Chamley, Christophe, ‘Taxation of Financial Assets in Developing Countries’, in World Bank Economic Review (Washington, DC), 5, 1991, pp. 513–34.Google Scholar

3 See, for example, Devarajan, Shantayanan and Melo, Jaime de, ‘Membership in the CFA Zone: Oddysean journey or Trojan horse?’, in Chhibber, and Foscher, (eds.), op. cit. pp. 25–33,Google Scholar and Lane, Christopher E. and Page, Sheila, Differences in Economic Performance Between Franc Zone and Other Sub-Saharan African Countries (London, 1991), O.D.I. Working Paper No. 43.Google Scholar

4 Cf.Lavy, Victor and Newman, John L., ‘Wage Rigidity: micro and macro evidence on labor market adjustment in the modern sector’, in World Bank Economic Review, 3, 1989, pp. 97–118.CrossRefGoogle Scholar

5 For an account of the Liberian system, see Wai, U Tun, ‘An Evaluation of the Currency System of Liberia and Panama’, in Savings and Development (Milan), 11, 1987, pp. 225–47.Google Scholar

6 Such a ratio would be consistent with the footnote still included in late 1992 in the country's page in the I.M.F.'s International Financial Statistics (Washington, DC) to the effect that ‘the amount of Liberian coin in circulation is small in comparison to US currency’.Google Scholar

7 See Aryeetey, Ernest and Hyuha, Mukwanason, ‘The Informal Financial Sector and Markets in Africa: an empirical study’, in Chhibber, and Fischer, (eds.), op. cit. pp. 125–36.Google Scholar

8 Contrasts between the experiences of different countries are stressed in Patrick Honohan, ‘Monetary Cooperation in the CFA Zone’, in Chhibber and Fischer (eds.), op. cit. pp. 148–60.

9 Cf.Stryker, J. Dirck, ‘Adjustment in West Africa: the Guinea experience’, in McCarthy, F. D. (ed.), Problems of Developing Countries in the 1990s, Vol. II (Washington, DC, World Bank, 1990), pp. 183–202.Google Scholar

10 Tenconi, Roland, ‘Restructuring the Banking System in Guinea’, Washington, DC, 1990.Google Scholar

11 See Caprio, J. Gerard and Honohan, Patrick, ‘Excess Liquidity and Monetary Overhangs’, in World Development (Oxford), forthcoming.Google Scholar

12 World Bank, Ghana: policies and program for adjustment (Washington, DC, 1984).Google ScholarPubMed

13 Chhibber, Ajay and Shafik, Nemat, ‘The Inflationary Consequences of Devaluation with Parallel Markets: the case of Ghana’, in Chhibber, and Fischer, (eds.), op. cit. pp. 39–9.Google Scholar

14 For further details, see Sowa, N. K., Monetary Control in Ghana, 1957–88 (London, 1991), O.D.I. Working Paper No. 45, and S. D. Younger, ‘Monetary Management in Ghana’, Harvard Institute for International Development, Cambridge, Massachusetts.Google Scholar

15 Chamley, Christophe and Honohan, Patrick, ‘Taxation of Financial Intermediation: measurement principles and applications to five African countries’, World Bank PRE Working Paper No. 421, Washington, DC, 1990. Even in low-inflation Côte d'Ivoire, the other West African economy included in the study, the existence of explicit financial sector taxation brought the total to over 2 per cent of G.D.P. on average.Google Scholar

16 Fry, M. J., Money, Interest and Banking in Financial Development (Baltimore, 1988);Google ScholarWorld Bank, Sub-Saharan Africa. From Crisis to Sustainable Growth: a long-term perspective study (Washington, DC, 1989); and J. S. Duesenberry and M. F. McPherson, ‘Monetary Management in Sub-Saharan Africa: a comparative analysis’, CAER Discussion Paper No. 7, Harvard Institute for International Development, Cambridge, Massachusetts, 1991.Google Scholar