Accelerated Economic Growth in West Africa

In spite of their current high growth episode, the level of financing of West African economies is too low to ensure sustainable long term economic growth. Their domestic savings are insufficient and their access to foreign borrowing from official creditors is also low. For most countries foreign indebtedness from private creditors is non-existent because of their poor credit risk ratings. Given their inability to improve their sovereign risk profile in the short to medium term, participation in a broad common currency union (CCU) can be the only means to achieve significant reduction in sovereign credit risk and borrow from international private creditors, the largest source of global finance.

With the theoretical model of Contingent Claims Analysis (CCA), it is shown that West African countries can combine their foreign reserves and, through a facility of mutual insurance against adverse debt service outcomes, increase the expected level of net foreign assets available for external debt service, and possibly lower its volatility. The simulation model of the CCA shows that, as members of a CCU, West African economies can benefit from a lower credit risk score that translates into easier access to private creditor lending than in the absence of CCU membership. Once a suitable level of risk is attained, borrower countries can raise their level of indebtedness without changing their risk profile provided the level of foreign reserves available to service their debt increases commensurately.

Long term economic growth is necessary for poverty reduction and it can be enhanced by increasing the productivity of factors of production. There have been various policy efforts to strengthen economic growth in the ECOWAS region but sustainable economic growth coupled with accelerated poverty reduction remains a challenge. The paper therefore investigates the sources of economic growth in the ECOWAS region with a view to unearthing whether growth of the region during the period 1980–2012 was driven more by factor accumulation or factor productivity. The methodology involves the estimation of a production function with real capital stock and labour as inputs while real GDP is the output, over the period 1980–2012 for the ECOWAS countries. Panel unit root and panel cointegration tests including the Levin-Lin-Chu, Maddala-Wu and Im-Pesaran-Shin tests for unit root and the Pedroni, Kao and Westerlund tests for cointegration are applied. Fixed and random effect models of production function are estimated. The growth accounting technique is then applied to the estimated shares of capital and labour in production. The results show that during the period 1980–2012, with the exception of Nigeria and Cote d’Ivoire productivity growth was not the hardcore of the growth observed in the ECOWAS countries but the growth was driven by factor accumulation. In addition, the contribution of labour to growth was positive but low in all the countries, the contribution of capital was negative in Cote d’Ivoire and Nigeria but positive in the other countries and that of total factor productivity was negative in Burkina Faso, Cape Verde, Ghana, Guinea, Mali, Niger and Senegal. The policy implication of this result is that in order to enhance long run economic growth in ECOWAS countries there is need to exert more efforts at raising productivity of factors of production. This requires more efforts at building human capacity for labour to be more effective and more investment in infrastructure, especially energy, in order to make capital more productive.

In the last 15 years, countries in West Africa have had reasonable growth rates averaging about 5 %; growth has been propelled by high prices of commodity exports. The paper examined whether growth has resulted in economic development of the sub-region. The lack of consistent data on relevant economic and social variables such as unemployment, primary and secondary school completion rates prevent a robust analysis of the growth—development nexus. Nonetheless, panel regression results show that public investment and democracy are positively related to economic development while lack of access to sanitation and water reveal a negative relationship to development. In addition, stylized facts show that marginal gains were achieved as regards development indicators. It is important that leaders, policy-makers and technocrats implement policies and programmes that stress sustained growth and inclusive development.

This paper sets out to empirically examine two issues. First, whether countries which belong in the same geographical area are apparently homogeneous and be pooled together in studying their growth drivers. Second and arising from the first, if homogeneity does not hold, what other growth enhancing variables drive the growth process for the group of selected WAMZ countries. The cross-sectional dependence result suggests dissimilarity among the countries and as such, the selected WAMZ countries should be studied independently. Foreign Direct Investment and democratic variables are prominent in the growth process of the WAMZ. However, Official Development Assistance (ODA) negatively impacted on economic growth of the economies studied, thus suggesting that it is highly fungible. To maximize the returns of government spending on growth and avoid the fungibility of foreign aid, fiscal discipline and consolidation are required for the apparent growth of the WAMZ economies.

This paper determines whether the recent growth trajectory in Sub-Saharan Africa (SSA) has been inclusive and pro-poor and discusses potential policies in making growth more inclusive. The motivation for the study is that in the economic literature, economic growth is viewed as fundamental in achieving poverty reduction, changes in income distribution are expected to lead to improving the poverty reduction outcome stemming from growth, and initial inequality would reduce the impact of growth on poverty reduction. Two conventional definitions commonly used in the literature to measure whether economic growth is pro-poor require knowledge of whether there have been distributional changes in income and whether those changes have improved the welfare of the poor. First, regional analyses show that compared to the rest of the world’s regions, SSA experienced negative per capita growth from 1985 through 2000, and that this was accompanied by significant decline in income distribution such that by 2000 the average income of an African in the lowest quintile of economic distribution was only 90 % of the income in 1985. Second, country-specific analyses show that unlike many East Asian economies that recorded average income growth along with their poorest quintile, in SSA economies even when growth in average income occurred, the incomes of the poorest Africans fell. The exceptions were in Gabon and to a smaller extent Ghana. Third, analyses of recent data showed that like the rest of the world’s developing regions, after realizing rising poverty rates from 1981 to 1999, SSA also saw steady declines in extreme poverty rate by 10 % from 1999 through 2010. However, it was the only region where the number of extreme poor rose from 205 million in 1981 to 414 million in 2010 with its global share rising from 11 to 34 %. The average gap of the extremely poor in SSA rose from $0.53 per day in 1981 to $0.54 a day compared to the $1.25 per day threshold for the extremely poor, and compared to the developing country average of $0.51 per day to $0.29 per day for the same time period. Therefore, the aggregate SSA extreme poverty gap doubled from $40 billion in 2005 PPP terms in 1981 to $82 billion in 2005 PPP terms in 2010 compared to the aggregate for all developing countries that fell by half from $362 to $169 billion all in 2005 PPP terms during the same time period. Therefore, the paper concludes that recent growth in SSA has not been pro-poor. Suggestions are provided to sustain growth across the SSA region to make growth more inclusive.

Everywhere, economists and policy makers, as well as almost everyone involved in development, are calling for more growth as the best recipe to world’s problems of poverty, famine and many other social and economic malaises. In the case of West Africa, growth is even more alluring, now that authorities of the International Monetary Fund, IMF, and the World Bank, among others, have pronounced Africa as the new growth pole of the world [NewsfromAfrica (Africa: Finance Ministers to discuss turning continent into the New Growth Pole of the World. 2012), ECA (Africa is new global growth pole, but continent must not rest on its laurels, says Janneh. 2011)]. Everywhere, also, governments and civil society groups are redoubling their efforts and the resources devoted to economic growth.

This paper revisits the historical oddity, first documented in Liberia by Clower et al. (Growth without development: an economic survey of Liberia. Northwestern University Press, 1966), in which economic growth not accompanied by development was seen as the bane of transforming shifting cultivation and commercial farming in Liberia. Our attempt encapsulates this oddity in the breakdown of freedom and its constitutive values from economic growth and development. Following the hypothesis, first put forward by Amartya Sen (What is development about? World Bank/Oxford University Press, 2001), that no major famine has ever occurred in a democratic country that has regular polls, opposition parties, and relatively free media, we examine the countries of the Economic Community of West African States, ECOWAS, for political and market transactional freedoms, using the Human Development Index, HDI, the Democracy Index and the World Press Freedom Index. Results clearly show that whereas, ECOWAS countries have been growing better than most parts of the world, their performance in ensuring that the values of freedom get passed down to their citizens leaves a rather disappointing conclusion.

Economic growth will no doubt aid the availability of the inanimate objects of pleasure and material comfort for West Africans. But the apparent lack of deliberate and active policies to integrate political freedom and market transactional liberties into the agenda for growth will hurt all efforts to develop the region both individually and as an economic, social and political bloc, for years to come.

The paper concludes by hypothesizing that whereas there is plenty evidence to show there can be growth without development, it is inconceivable for a nation to develop without the attendant political liberties and transactional freedom.

Despite the gains in growth, West Africa remains a very marginal (and fragile) player in the global economy. Neither the sterling growth performances nor the quadrupled commodity prices seem to have affected the region’s share of world export. This paper aims to question the coexistence (or even correlation) of improved macroeconomic stability in West Africa with poor diversification. Using an endogenous growth accounting procedure, the paper generates coefficients of effect of selected macro variables on growth for a panel of 16 West African countries. The sample is divided along the lines of resource dependency (agriculture, aid, oil and solid minerals). The outcome is then compared to that from an inclusive (regional) panel. Explanatory variables of interest include the key rates (interest and exchange) fiscal measures and selected structural measures. The paper found that overall effect of deviations of these variables has been distortions in relative prices that hurt domestic production. This distortion has fuelled a rise of a set of interest groups that feed upon the sectoral inefficiencies. Using insights from structuralism, post-structuralism and Nurksism, the paper argues that macroeconomic policies do have a role to play in diversification, but that this role is played through their impact on relative prices. Specifically, where policies are not able to work on relative prices first, they are ineffective in leading to diversification.

This study examines the extent of manufacturing export in ECOWAS countries, how it has been affected by the extent of infrastructural development and the distilling role of institutions. In retrospect, we present stylized facts that proves that ECOWAS poor infrastructural development has largely being driven by the poor institutions, which promotes private benefits rather than public good (such as infrastructure). In essence, this has hampered manufacturing export and reduced the extent of competitiveness of these countries.

Development thinking in most African countries is gradually shifting in favor of industrial policy. This paper examines the dynamics of industrial policy, with a special focus on West African countries. The paper then presents a comprehensive macroeconomic framework which can guide policy makers in designing and implanting effective industrial policies. Taking into account country and sector specificities, the paper concludes by examining the various industrial policy tools which can be implemented to accelerate industrial development on the continent.

The objective of this study is to analyze the role played by basic infrastructure in the growth and convergence of the economies of the West African Economic and Monetary Union (WAEMU). After a description of the dynamics of the basic infrastructure of WAEMU and a literature review on theories of integration, we will discuss the model of convergence used for this analysis. Data for this study consists of panel data for the eight member countries of WAEMU gathered between 1980 and 2012. Statistical data was retrieved from the World Bank. The conditional convergence model is estimated by GMM in dynamic panel of Arellano and Bond. The results show a phenomenon of conditional convergence in the Union. Moreover, they demonstrate that an improvement in economic and social infrastructure in the region would result from significant gains in per capita income growth.