Analyzing the Economic Impact of Liberia’s Dual Currency Policy, A View From the Low-Level Square-table

By: Wonderr Koryenen Freeman

The Perspective
Atlanta, Georgia
February 26, 2015



On February 23rd at the Monrovia City Hall, some of Liberia’s most well-known political and economic elites got together to talk about a perennial economic problem – Liberia’s dual currency policy. It was a “high-level” roundtable, so I wasn’t invited. I make no fuss about that! Like G. Henry Andrews, I am only too content with making my contribution from “where I sit” – with the masses at the “low-level” squaretable. And from where I sit, with the masses at the low-level square table, I am deeply disappointed at the outcome from this high-level roundtable. We were hopeful for the high-level roundtable, but at the end of the day, we the people at the “low level” squaretable wanted to see leadership exhibited. We wanted to see a decision in the interest of the masses. We wanted to see the long-awaited coronation of the Liberian dollar as the sole legal tender. But we were disappointed. Instead of moving closer to a declaration of the Liberia dollar as the sole legal tender, what we got was more of the same:“that Liberia is not ready yet for a single currency regime”; “that Liberia is a very “special” country and it must continue with its dual currency”; “that Liberia must not rush with this dual currency thing”; “that dual currency will go, but let’s do it “small small.” Of course the sad truth about the negative impact of this dual currency policy is that its greatest adverse impact is felt but those of us who sit at the low-level squaretable. So in this piece, I shall endeavor to prove that Liberia’s dual currency policy has no academic basis, no empirical basis and defies ordinary logic, and that the decision to continue this doomed policy is a disservice to the Liberia people. It underscores more and more why (come 2017) Liberia needs leaders with better judgment, better common sense; people who are prepared to dispense with Worldbank, IMF and Harvard University gibberish, if it doesn’t make sense!

Under a dual currency regime, the Liberia dollar will never gain strength (appreciate)
Back in the days (1982) when Sammy Doe understood the implication of the use of the US dollar, he simply ordered the use of the“7-Corners”, which later evolved into the” JJ Roberts”, and ultimately into the “Liberty”. He didn’t convene any “high-level” roundtable. He just sat on his “low-level” squaretable, applied some little common sense and said “no more US dollars, we’ll do just fine with our 7-corners.” That’s leadership, something our current crop of US-educated, US-obsessed, US [Green] card leaders have a tough time exhibiting. And so it was, all of a sudden, in the 1980s, Liberians and foreign residents alike began to build Liberia exponentially. But I don’t not intend in this piece to only appeal to common sense to show that the dual currency policy is not working for Liberia (it sure is working for those seated at the high-table!). I intend to take the argument to the high-table home pitch, academia, and challenge the assumption that somehow Liberia will fall apart by declaring the Liberian dollar as the sole legal tender.

Why Liberia needs a single currency NOW, the academic argument
In this section, I shall show that the Liberia economy is highly dollarized and that as long as our economy remains highly dollarized, the value of the Liberia dollar will continue to decline. The table and chart below are based on CBL annual reports (2006-2013), and contrary to the prevailing view at the high-level roundtable, Liberia has suffered long enough. It time to change course. It’s the height to fallacy to do the same thing over and over and again and expect a different result. The CBL and others at the roundtable need to go back to the data and look again!

When a closer look at the table and chart is done, one will undoubtedly realize and appreciate the following:

1. That, from the table, one sees that the Liberia dollar has never appreciated over the past eight years. The average annual depreciation has been -5% and [cumulatively]-40% since 2006. In fact if the argument is extended to 1999 (upon the creation of the CBL), the Liberian dollar has lost nearly 100% of its value – thanks to the high level of dollarization of the Liberian economy.

2. That, from the chart, one sees that the trend of depreciation of the Liberian dollar appears to mimic the trend seen in the level of dollarization, clearly pointing to a high level of correlation between the two – and a negative correlation at that;

3. That as long as Liberia continues to keep the dual currency policy in place, the Liberia dollar will continue to depreciate year after year and there is never going to be a time when the situation is going to get better, all by itself, or via a monetary policy. In fact, it is plain hubris to think that there can be monetary policy in an economy that is up to 70% dollarized.


The CBL started it FX auction since 2004. The Bank often touts its FX auction as a policy tool for taming the devaluation in the Liberia dollar. But nine (9) years after, in its 2013 report, the CBL writes viz: Of the total amount of US$373.1 million demanded in 2013, only US$72.0 million (19.3 percent) was provided by the CBL; resulting into an excess demand of US$301.1 million in 2013. This was translated into the upward pressure on the exchange rate. [Of course, the 19% success the CBL is claiming does not count those who don’t bother to go to the CBL to solve their FX problem. If those people are factored in (as evidenced by the wide international trade deficit of USD 660M [in 2013]), the CBL is in reality only addressing about 3-5% of the problem.

Perhaps this failure to stem the devaluation of the Liberia dollar, explains why the CBL decided to concentrate on microfinance (to distribute money to the marketing association and the “yanna” boys association), to make us forget the primary reason for the establishment of the CBL. Our Governor has received more “gowns and honors” than all the politicians in Liberia combined. But, gowning or nor gowning, we will not be fooled, according to the CBL Act of 1999, PART II §(3)(3a) the primary function of the CBL is to “achieve and maintain price stability in the Liberian economy”….  to “preserve the purchasing power of the national currency.” And on this score, the Bank has failed. We expected that leaders at the high-level roundtable to have been bold and call a spade and spade. But they didn’t, they prevaricated, equivocated and obfuscated a very simple issue – that the CBL avowed dual currency policy is a sham and must be abandoned – right NOW and not later on!

Why Liberia needs a single currency NOW, the empirical argument
In July of 1993, in Virginia, Liberia, a similar high-level roundtable was held. It was themed: symposium on the Liberian monetary system and the challenges for reform in the 1990s. At that meeting, a panelist, Christopher F. Konneh, then Deputy Governor of the National Bank of Liberia, called for the “the Liberian currency to be established as the sole Legal tender”. But in the end, the symposium, amongst other things, concluded that “a financial sector study be conducted to ascertain the form and manner through which a series of reform measures will be implemented [absolutely no resolution on the Liberian dollar being the sole legal tender] as was proposed by Chris Konneh.


Fast forward to 2015, twenty-two (22) years later, some of the very same individuals, converged at the Monrovia City Hall, to discuss the dual currency policy – what did they conclude – that Liberia is a special case and that it must continue to keep the dual currency policy in place – for now. Do we need another 22 years to appreciate that the dual currency policy is of no use and said policy must be abandoned if Liberia is to prosper economically? Why are our leaders making it to appear like the world would come to an end if the US dollars in not used in Liberia. With the exception of Zimbabwe (which uses half a dozen currencies), and which is in economic chaos, nowhere in Africa is the US Dollar used as a legal tender. But in Liberia, personal interests by our political elites always seem to trump the national interest. No wonder, old Tom always quipped “this too is Liberia”.

I find it incomprehensible that a sovereign state cannot divorce itself of the notion that it cannot survive without the use of another country’s currency. It’s the same notion that has got our leaders crisscrossing the globe asking for development aid, as opposed using our available resources wisely – engendering home-grown development! The largest economy in Africa, Nigeria, does not use the US dollar. The most sophisticated economy in Africa, South Africa, does not use the US dollar. The fastest growing economies in Africa, Ghana/Rwanda/Mozambique/Kenya  etc, don’t use the US dollar. And they also get along just fine.  Even the smallest economy in Africa, Sao Tome and Principe, does not use the US dollar, and no one predicts economic doom for them. So what is really our problem in Liberia? When are we going to run a sovereign country? When are our leaders going to think about our Nation’s prosperity first, instead of thinking about their children school fees in the US, their mortgages payments in the US or their rentals from the apartments in Mamba point?

The Conclusion
“From where I sit” – and on behalf of those struggling at the “low-level”squaretable – it clear to me that given even another 22 years from now, the same caliber of leaders who gathered at this “high-level” roundtable will come the same conclusion (just as they did 22 years ago in Virginia, outside Monrovia) – that Liberians leaders are not yet ready to used the Liberian dollar as the sole legal tender in their country, Liberia. Imagine that? It’s a sad reality, but that is what is unfolding before our very eyes. That’s economic policymaking, Lib style!

About the Author: Atty. Wonderr Koryenen Freeman, LLM, MBA, is a Liberian lawyer, Accountant and a socio-economic commentator. He resides in Paynesville, Liberia with his wife and kids. Wonderr Freeman has penned a number of articles for local dailies and online blogs. Some of his related articles:  The CBL Economic Gospel vs the Reality of a Perpetually-Sinking Liberia Dollar (02/2012); Liberia Nigeria Central Banks Thread Separate Paths on MSME Financing (11/2013). The Plain Truth About the Liberian Economy –an Outsider Perspective (01/2014); The Almighty US Dollar and the Dual Currency Policy, Liberia’s Porcupine Gut (03/2009). Atty. Freeman can be reached at, facebook, googleplus, linkedin and   tel. +231.777.888.188             

"Common sense gives good results in the face of debatable theories".
Dual Currency versus Capitol Flight; a match to analyse.
Kunkunyon at 06:03AM, 2015/02/27.
Tatu Gyude
Mr. Freeman, the transition from dual currency to single currency is not a one day event or the decision can not be made at a roundtable discussion as suggested in your first paragraph. Developing countries that de-dollarize their economies took series of steps along the way. De-dollarizing the Liberian economy would take at least 15 years given that there are two approaches to this process. The transactional and financial de-dollarization. The transactional will basically focus on changing prices quotes from LD to USD at various shopping centers thereby encouraging the usage of LD. While the financial will look at saving, time deposit and other accounts. As we move along the way, we need to develop a stress test that will ensure that our macroeconomic fundamentals are on the trajectory thereby removing the legal tender of the USD. So, this process will actually take some time to materialize.
Tatu Gyude at 07:02AM, 2015/03/10.
Gleh Appleton
Granted. It may take time to materialize. But what we ask is a timetable backed by commitment rather then an opened and blunt statement without any empirical base that "Liberia is not yet ready". As high level policy makers, you have a responsibility to get the country ready for this transition.

We need decisions rather then conclusions.
Gleh Appleton at 05:09AM, 2015/03/15.
We keep dragging the issue of de-dollarization and this will not help us as people that should be prepared to move forward stabilizing and bringing to an end the dual currencies crises in Liberia. We have to remember that in as much as USD continuous to remain on the Liberia market, the Liberian dollar will continue to depreciate. Said depreciation does not benefit Liberia since Liberian exports are very limited and cost are so high. More besides, Liberian products on the international market are not cheep; a contradiction to one of the reasons why currency should be valuated. what we need to do is to begin the process of de-dollarizing the USD, devalue the Liberia dollar to encourage production cheaper products to be sold at cheaper prices in the international market. by so doing, products from Liberia will be in high demand thus generating Hugh income that will flow to the national budget.
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Peter Forkpayea Zogolee Zaizay
FDI with Tax Exempt and Solidly Anchored on a PPP and Single Currency Regime can Jump start the Liberia Economy – But A hard and difficult decisions to make.

Peter Forkpayea Zogolee Zaizay-Deputy Commissioner General in Charge of Administration, Liberia immigration Service/LIS
Cell: +231886584226,+231886584226;

Empirical Research and studies have shown that a Foreign Direct Investment supported by minimum tax exemption can jump start the Liberia economy and engendered a dynamic democratic development.

Foreign Direct Investment/FDI should be solidly anchored on a Public-Private Partnership/PPP in Liberia with a single currency. This will require making some hard and difficult to make decisions by our national policy decision makers. The hard and difficult to make decisions will include single currency regime in Liberia in favor of the Liberian Dollar. This decision is very much important to make, because in the history of Liberia, the Country has suffered and continues to suffer the devastating effect of the use of the US Dollar as legal tender in its development. Cases in point are the 50s, 60s, 70s and 80s, when our extractive industries were booming; but because our currency was the US Dollar, Capital flight undermined the development of the Country. So, the idea is that since the US Dollar is not the currency of Liberia, and the CBL is not a subsidiary of the Federal Reserve Bank of the United States of America/US, nor is Liberia a member state of the US, it is very much important that the US Dollar be kept in the Banks and control therefrom for both macro and micro economic stability in Liberia.

It is very much important for Liberia to take pride in its own currency to finance its democratic development programs. The strength of every currency in the world is the strength of the faith and confidence of its people or subjects; which is part of the patriotic call to duty by citizens.

The second hard and difficult to make decisions is/are the need to encourage foreign direct investments/FDI in Liberia with definite period of tax exemption from 5 – 10 years. This will help the country to form the needed capital to finance development. This decision should be supported by a strong public – private partnership/PPP as the foundation and anchor on a single currency regime.

The third hard and difficult to make decision is the development of the national insurance industry, because in economics, insurance is not only a function of investment, but a saving on investment, as it helps to generate high revenue and form capital in a country.

It is a system wherein the healthy pay for the sick, the living for the dead and the effective for defective vehicles, etc. This leads to fast turnover in terms of revenue generation. The Insurance Industry in Liberia is either neglected or under supported by the national policy decision makers in their financial and economic management decision making processes.

The fourth hard and difficult to make decisions is/are the recapitalization of development banks in the Country to include the Housing and Savings Bank, that will finance infrastructural development such as housing, roads, energy, transport and telecommunication, etc in Liberia; and the Agriculture and Cooperative Development Bank, which will finance agriculture and cooperative development, to enhance capital formation in order to stimulate economic growth and development in the Country. The Europe and other dormant banks will help to finance the financial and capital markets when recapitalized.

The recapitalization of banks can be made possible through FDI and PPP, when a decision is made on them.

Useful lessons can be learned from economically thriving societies like China, Singapore, India, Malaysia, Indonesia, etc to inform these hand and difficult to make decisions in Liberia.

These hard and difficult to make decisions can be supported by telling our extractive industries and concessions to establish factories, and/or industries to add value to our resources for export to enhance trade and generate the much needed foreign exchange to promote economic growth and development.
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