Capital Account Liberalisation, Financial Globalisation, and Business Cycle Synchronisation in West Africa: Implications for Nigeria

This dissertation examines the effects of capital account liberalisation and financial globalisation on business cycle synchronisation among West African economies, with particular focus on the implications for Nigeria as the regional anchor economy and potential monetary union participant. The debate on West African monetary integration has intensified with the planned transition to the Eco currency, and understanding whether ECOWAS economies are sufficiently synchronised to form an optimum currency area is critical for assessing the costs and benefits of currency union membership. The study employs a multi-country macroeconomic panel data design using quarterly national accounts, capital flow, financial openness, and monetary policy data for 15 ECOWAS member states sourced from the IMF, World Bank, and ECOWAS Commission for the period 2000 to 2023. Dynamic factor models are used to extract common and country-specific business cycle components, and panel regression with instrumental variables estimates the causal effect of financial integration intensity on synchronisation degrees. The Chinn-Ito financial openness index is used as the primary measure of capital account liberalisation. The theoretical framework integrates optimum currency area theory, the financial globalisation and convergence literature, and the international macroeconomic trilemma. The dissertation makes original contributions through the construction of a West Africa-specific business cycle synchronisation database, an original financial integration pathway typology for ECOWAS members, and empirical identification of the synchronisation threshold required for viable currency union participation. Policy implications are developed for Nigeria's monetary union engagement strategy and for the ECOWAS macroeconomic convergence surveillance framework. Keywords: capital account liberalisation, business cycle synchronisation, ECOWAS, monetary union, financial globalisation