Monday, 2 March 2015

Liberia: Ending dual currency to transform economy

Liberia is currently reviewing the economic and financial drain from the recent crisis. Liberians want to put a final end to the country being synonymous with Ebola. Prior to the crisis, the Liberian economy was breezing through the global financial crisis even with a few hiccups. Liberia's growth rate was 6.8% in 2014. Aside from years of rampant corruption, the growth has been fueled by a combination of iron ore, rubber exports, agricultural products, construction by private businesses and government, oil exploration and mini manufacturing companies. However, some 80% of Liberians are employed in the informal sector. In theory many Liberians are self employed as market women, street vendors, work in unofficial, self constructed business buildings across the country. Agriculture and commercial food and farming production has been pushed as the key to aiding economic growth.

Bloomberg Business:
Liberia's Economy, Nigerian Trade & Africa Telecoms

Fleeing capital

Entrepreneurs in Post war Liberia Journeyman Pictures

There are also many Small and Medium size Liberian businesses in construction, furniture, public works, tourism, and hospitality management.  Many Liberian businesses have long complained and called the government out for snubbing Liberian businesses for Lebanese and other foreign owned services in Monrovia and other towns. Foreign businesses people who have lived in Liberia for decades in some cases are not allowed citizenship due to a few clause in the Liberian Constitution which grants citizenship to only citizens of "black" descendant.  As a result the capital and revenue in (US dollars) the well served and visited Lebanese supermarkets, hotels and auto dealerships that dot Monrovia receive are sent back to Lebanon or other neighboring countries and even the U.S. Dual citizenship is an ongoing debate that most Liberians may accept if put into practice. Most businesses in Liberia utilizes the USD over Liberia's own local currency the Liberian dollar. The LD or Liberty is used by taxis, pehn pen drivers, markets, traders for selling their products. To add further confusion, most market and traders than have to buy their supplies in USD and afterwards convert their money back into Liberian dollars. Also consider the fact that Liberian coins are not in use making certain item more expensive than they should be and also doing away with small change. Both currencies are used as the main legal tenders in Liberia which has log represented a splitting headache for the majority of Liberians who have easier access to Liberian dollar instead of the USD. The USD is regarded as valuable against the LD in financial strengthen and creation of revenue within the country. Being the world's reserve currency, some Liberians find it convenient to use the USD in all transaction and financial reporting on the country's growth and financial well being. Liberia has yet to create a stock exchange and stock market.

Brief economic history of Liberia and Post Ebola affects on the economy

A single currency for Liberia

Now the economic ministry along with the Central Bank of Liberia are planning to change the dual currency regime. The CBL director Mill Jones, Pro te pore Jallah and many Liberian organizations have called for the creation of a single currency system. Both CBL and ministry are emphasizing the use of the Liberian Dollar to end the financial up and down of he mini currency spat between the USd and LD. For practical reasons, phasing out the U.S. Dollar across Liberia an replacing it with the Liberian dollar has been praised and accepted by ordinary Liberians. Ghana had gone through de dollarization, while Nigeria had replaced the colonial West African Pound with the Naira decades ago. so has many other countries pushed put the USD out of their economy for local currencies to fuel economic development that flows down to local people. As for nationalizing Liberia's precious resources, that discussion has yet to begin. Implementing the single currency most likely the Liberian dollar will be done cautiously emphasizing the need to boast the value of Liberian dollar, further grow local, Liberian SME and businesses, push for locally made products and manufacturing and preparing for the risks and dangers that come with single currency. Jones suggests that careful
Planning and implementation could drop the current exchange rate of 1USD=72 Liberian Dollars to at least 1USD=30 LD. Gradually, the exchange rate will lower if done right. Liberia is not reinventing the wheel.

Liberia Investment

The quest for a single currency and dedollarziation is nothing new. The Liberian Dollar and coins was created in 1850s originally modeled on the USD but the LD has long developed its own identity both nationalistic and symbolic. The LD was dropped for USD as the main currency in the early 1900s. It made a comeback wih a new design in 1943. But it's rise was pushed aside by the USD along with Liberia's well known pro-US and Western political Nd economic system throughout most of the Cold War. Ordinary Liberians empathizing with their neighbors' fight against colonialism and neocolonial design in the form of structural adjustments and unfair currency pegs with locks currencies forever attached to the financial strength of the French franc or British pound. Now it's the Euro in many West African countries including the Seychelles and Caribbean countries. In late 1970s, Liberia's radical and revolutionary president William Tolbert started turning Liberia away from the United States and Western countries towards the wider West African region and the non aligned movement. Liberia had managed to balance itself between its non aligned friends and Western supporters that other countries found difficulty with comprising their principles. It's his diplomatic tightrope walk that saved Liberia from colonized by Europe. American influence can still be felt in the country today but in a lesser extent than Tolbert's day. Tolbert promoted a more nationalistic and self sufficiency identity for Liberia including producing Liberian made products, manufacturing and every citizen had a farm in their backyards and agriculture was emphasized as a source of pride and well being for the country as a whole. Self sufficiency and a push to revive the agricultural products and manufacturing is nothing new. Discussions have been ongoing on how to implement laws and lay the foundations for beginning Made in Liberia products and manufacturing while investing in human capital and agriculture.

No Land, No Food, No Life

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