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The Naira internationalization potential in West Africa and Africa

Author

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  • Michael Akume

    (African Export-Import Bank (Afreximbank))

Abstract

This study investigates the potential for internationalizing the Naira as a regional vehicle currency for trade and financial transactions in the West African Monetary Zone (WAMZ), ECOWAS, and the African Continental Free Trade Area. The research is informed by Nigeria’s economic strength, external reserves, and trade dominance, suggesting that the Naira could serve as a vehicle and reserve currency in these regions. We develop a model to analyze Nigeria’s reserve-to-region total ratio based on macroeconomic fundamentals—economic strength, trade, and stability—as well as network externality measures. The findings reveal that while trade and economic stability are significant predictors, economic size is not due to limited diversification. Simulation results indicate strong potential for the Naira as a regional currency within WAMZ and ECOWAS, though its broader capacity in Africa is limited. We recommend policies to enhance production capacities in key economic sectors to boost international trade potential.

Suggested Citation

  • Michael Akume, 2025. "The Naira internationalization potential in West Africa and Africa," Quality & Quantity: International Journal of Methodology, Springer, vol. 59(6), pages 4893-4925, December.
    • Handle: RePEc:spr:qualqt:v:59:y:2025:i:6:d:10.1007_s11135-025-02192-w
    DOI: 10.1007/s11135-025-02192-w
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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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