Exploring the Nexus Between Currency Union Membership, Trade Integration, and Welfare in the ECOWAS Context: Implications for Nigeria

This dissertation explores the complex nexus between currency union membership, trade integration outcomes, and welfare implications for ECOWAS economies, with particular attention to the distributional consequences for Nigeria as the largest economy and net contributor to a potential Eco currency union. The theoretical debate on West African monetary union has evolved significantly following repeated delays to the Eco currency launch, and this dissertation advances the frontier by developing an original welfare decomposition framework that disaggregates the expected costs and benefits of currency union participation at the country level. The study employs a structural macroeconomic modelling approach, calibrating a dynamic stochastic general equilibrium model with West African-specific parameters to simulate the welfare effects of Eco currency union scenarios under varying degrees of fiscal harmonisation, labour mobility, and trade integration. Simulation results are benchmarked against reduced-form empirical estimates using synthetic control methods applied to the GDP and trade flow data of early ECOWAS monetary integration steps, sourced from the IMF, World Bank, and ECOWAS Commission for 1975 to 2023. The theoretical framework integrates optimum currency area theory, the endogeneity of OCA criteria hypothesis, and the new open economy macroeconomics model of monetary union. The dissertation makes original theoretical contributions through the welfare decomposition framework, an extended OCA criteria index calibrated for structural commodity dependence, and an endogenous trade creation model that accounts for asymmetric shock transmission in resource-dependent union members. Policy implications address Nigeria's negotiating priorities for Eco currency union design and fiscal transfer mechanisms. Keywords: currency union, ECOWAS, Eco currency, welfare, trade integration