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Bullion

Keywords

External Reserves, International Reserves Currency, Financial Markets.

Abstract

The paper underlined the challenges and opportunities for managing Africa's external reserves by Africans after identifying several pre-conditions for an African currency to emerge as international currency and noted that these conditions have not yet crystallized in Africa. Although African external reserves have grown over time the benefits of such growth in terms of facilitation of domestic financial markets and even the earning are not commensurate with the reserves growth rate. The non-convertibility of African currencies, volatile macroeconomic and sometimes volatile political environment coupled with the shallowness of the domestic markets are the main challenges that are faced by the continent. However, with recapitalization of the African financial institutions especially banks and the attainment of stable polity in both economic and political fronts, there is hope for the continent's institutions to take their rightful place in the emerging global financial system by first using the African resources as the first step. The involvement of creditable African financial institutions in the management of the reserves either within or outside Africa will in no small measure strengthen the development of the African financial system but also ensure that a bulk of African resources work for Africa as the difference between what the current fund managers paid to the African central banks and what they actually get as commission or profits will be retained explicitly or implicitly in Africa. Africa's financial systems have been deepening and broadening over the past years, the result not only of improvements in the macroeconomic and institutional framework, but also of the worldwide liquidity glut, which directed more capital flows into Africa. The paper concluded that, for better or worse, the future of Africa's financial systems is closely linked to the development of global finance, as are its real economies. However, it is up to Africa's financial sector stakeholders bankers, donors, and policymakers to guide financial sector reforms in a way that maximizes Africa's opportunities, learning both from their own experience over the past 50 years and the experience in other emerging and developed economies. One of the ways to accomplish this is to fast track regional economic and monetary integration in Africa as well as infrastructure upgrade.

Author Bio

The Author is a staff of the West African Monetary Institute - Accra, Ghana.

Publication Title

CBN Bullion

Issue

4

Volume

32

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