The common currency will be based on a basket of strategic goods vital to the region. This basket will have the status of legal tender and the goods it contains will become “monetary, currency goods”⁵. The regional central bank will issue banknotes against a set of commodities expressed in their physical units of measurement, for example x grams of commodity 1 + y grams of commodity 2 + z tonnes of commodity 3 + w metres of commodity 4, and so on. The basket of products, the raw materials, will only be sold and purchased in its entirety. Anyone wishing to get such banknotes must prove that they own the entire basket in specified proportions. The different elements of the basket will have their own prices at the respective exchanges, but only the whole basket has a fixed price at which it will be bought and sold by the regional bank. It would be appropriate to start with a few key strategic commodities, and then expand the basket. Later, we will see what this means specifically for the AES countries.

Full coverage of the regional currency in physical basket quantities will be maintained at all times. The new system can be defined as a commodity currency board⁶. The new currency will only be issued and destroyed when commodity reserves increase or decrease accordingly. These reserves, i.e. the components of the basket, will be stored in officially designated public warehouses, which will issue warehouse receipts or certificates of deposit⁷. These certificates attest to the ownership of a certain amount of the basket. In the balance sheet of a new regional commodities bank, we will have the new regional banknotes (Sahel/SHL) on the liabilities side, and certificates of deposit, i.e. warehouse certificates guaranteeing the availability of physical resources in the warehouses, on the assets side. The names of the warehouses (which should not be very numerous) will appear on the bank’s assets side; they will declare the stocks of goods that are the resources in the basket (see table 1, on the composition of the basket see below).

On the liability side of the regional bank, in addition to the issued resource baked banknotes, the three national central banks will keep their reserves (statutory and free), similar to the modern practice of commercial banks holding their reserves (required and free) in the central bank. National governments and leading national, regional and supranational and foreign institutions will also be able to open different accounts in the resource currency.

The bank’s balance sheet will be transparent and published either periodically, e.g. every week, or on an ongoing basis. The aim is to ensure confidence in the currency by monitoring its coverage: the movement of assets will give signals both to the bank and to the users and producers of money. In addition to the fixed price at which the basket will be bought and sold by the common bank (these will be determined by the resource experts), the basket will also have a market price. It will be formed by the movement of individual prices of its components. At any time, arbitrage will allow the basket to be bought or sold according to the difference between the market price and the set price. The bank will only sell or buy the basket in its entirety; for example, if the arbitrageurs wish to sell the basket to the bank, they will have to procure the goods in the required proportion.

To finance the system, there will be a small margin (1-5%) between the buying and selling rates of the basket. With this small margin, the bank will finance its operations, insurance of the goods, their periodic replacement (if necessary) and management of the storage of the goods. The warehouses will need to be optimally located in terms of raw material production and necessary transport. The aim is to minimise transport costs, although a large proportion of transactions will be carried out through bookkeeping entries. It can be assumed that physical movement to and from the warehouses will not be significant, except in periods of volatility.

Assuming that monetary, or currency, goods are structurally determined by the economies of the zone, price controls over the basket of monetary goods should stabilise the general price level in the countries of the zone. The stability, or low fluctuation, of prices is complemented by the control of sharp falls in aggregate demand and the emergence of unemployment due to the marketable nature of the monetary anchor (the basket). This is because the items in the basket are directly included in the consumption and production process and export and other operations. In this sense, monetary goods are very quickly transformed into ordinary goods, and conversely, ordinary goods into monetary goods. In this way, the price target is combined with a direct effect on overall supply and demand, by influencing the supply and demand of monetary goods.

The new currency will serve the trade between countries by regulating the final clearing balances, i.e. the purpose of the settlement. It will be in demand not only as a means of payment within the AES zone but also outside it because it will guarantee access to important and irreplaceable resources. Countries in the zone will be able to import the industrial and other goods they need. it will also serve as a means of saving and investment, because the interest rate formed will be very close to the real interest rate (equilibrium rate). The common currency will be used to make large payments, and any banknotes issued will be in large denominations⁸.

Assuming that the rules of the system are observed, we can expect that the sustained external demand will keep these currencies’ exchange rates stable against the dollar and, moreover, that they will appreciate against other fiat currencies.

Each country in the zone should retain its central bank and its currency, not only as a symbol of sovereignty and national identity, but also as a means of reacting to specific national problems and financing national projects. The experience of contemporary monetary unions (euro zone, CFA zone) has shown the limits imposed by complete elimination of the national currencies. Taking account of this experience, the national banks of the AES will be able to issue national currencies, provided that they are backed at least 50% by common resource money and optionally by other precious metals, as recommended by the rule (see table 2). The exchange rates of these currencies will be determined in relation to the common resource currency; it is advisable to synchronise them between the participants.

In addition to the national banknotes and coins, the liabilities on the balance sheets of the national central banks will also include accounts of the national commercial banks and financial institutions. These will help maintain the required reserves and store the free funds. The national governments will also keep their funds in their countries’ national banks and have the right to hold part of their funds in regional banks (see previous balance sheet). Their accounts, mainly of the Ministries of Finance, will reflect the dynamics of budget receipts: tax and other internal receipts, the external ones, such as transfers, aid and loans, and budget payments including salaries and debt service. It means that the national bank will be the main treasurer of the government, with the possibility to open accounts in the regional banks, too. The government will thus have more opportunities to optimize the management of its funds.

Within the above-mentioned limit of 50%, the national banks will be able to purchase the national debt, make advances to the government, refinance banks and perform other functions. The national currency will be used mainly for domestic circulation and may exist in small denominations. The regional currency in large denominations will circulate alongside national currency, and this co-circulation will provide competitive pressure and checking functions. In order to stabilise the demand for both types of currency, the payment of taxes and salaries in the public sector to a certain extent could be settled in common or national currency. Exporters and producers of strategic goods, for example, could pay their taxes in common currency.

The common bank could fulfil the function of lender of last resort vis-à-vis the national central banks, provided that it had a “banking department” together with the “issuing department”⁹, to which the volume of the basket of goods exceeding the banknote issue and the reserves of the three banks would be transferred. In all cases, the need for liquidity under a resource money regime is decreased and, ideally, eliminated because the money is directly usable. It is also possible to envisage agreements between the AES confederation and other organisations and countries, for example China, Russia and other BRICS countries that have the same resources in the basket. The bank would also be the “saviour” of last resort because its resources would have real consumption and production value, directly regulating effective demand and support global employment.

The three AES countries are relatively small but very open economies with low nominal GDP measured in dollars¹¹. They depend on international market prices for their exports, mainly commodities, on the prices of pulses and some other foodstuffs and those of manufactured goods they import. Fluctuations in the terms of trade and balance of payments affect the monetary sector leading to deflation or inflation and, ultimately, unemployment and poverty. Capital inflows, including FDI, depend essentially on the stability of their currencies and banking systems and on political factors¹².

The national monetary architecture will be based on the infrastructure of the existing branches of Banque Centrale des États de l’Afrique de l’Ouest (BCEAO), which will become fully-fledged national central banks¹³. As for the new institution, the regional bank, its capital will be made up of contributions from the three (or more) countries, in proportion to their GDP and population. In a similar way, it will be possible to determine the initial contribution to the common monetary (resource) fund, i.e. the stock of monetary raw materials: producers of monetary raw materials can contribute the agreed amounts in the form of advance import payments for one or two years in advance, as a kind of start-up aid. The Board of Governors will be made up of five persons, one representative from each country, a Governor and a Deputy Governor with non-renewable terms of office of 7 or 9 years; rotations will be provided for on the national basis. The detailed organisational structure of the Bank will be specified at a later date. The place of the Bank’s headquarters will be determined in the course of the negotiations, as will the location of official warehouses for monetary goods storage.

Warehouses should be close to production sites (mines, etc.) and convenient transport hubs. It is desirable to have at least one warehouse in each country. Since the AES countries have no direct access to water, a warehouse should be located in a port of Morocco, whose stated geopolitical strategy is to serve as an outlet for the Sahel countries from the Atlantic, West Africa Free Zone (Loulichki, 2024; Islah, 2024, Koslowski, 2024). It is crucial that these warehouses are built in optimal locations not only in terms of transport, but also from the point of view of safety and security. In our opinion, this is a major problem¹⁴.

The initial balance sheets of the joint bank and the national bank are important. They should be very simple and clear for the general public to understand, particularly the balance sheet of the common bank. In the opening balance sheets of the national banks, it is desirable to minimise the transfer of previous public liabilities, probably move them for amortisation to a separate institution or even cancel them.

The basket must be made up of raw materials and goods that are of strategic and vital importance to the countries in the zone, both in times of peace and in times of crises, such as natural disasters, sanctions, blockade, or war. The AES countries are rich in raw materials, particularly gold and strategic resources (see Table 4). There are gold deposits in the three countries, oil in Niger and Senegal that can also be considered, uranium in Mali and Niger, and lithium in Mali. All four countries are rich in agricultural raw materials, particularly cotton, groundnuts, maize and rice. The weights in the basket have political significance as they must reflect the profile of the countries in the zone. The weights must be determined according to a clear and economically sound methodology or algorithm, but the model can be simplified from the outset, with fewer elements and rounded weights. For example, three or four groups could be distinguished for the AES¹⁵ :

(i) basic strategic raw materials — gold and oil

(ii) strategic metals and rare earths — manganese, iron, lithium and uranium

(iii) exports of strategic products — cotton, maize, rice and groundnuts

(iv) strategic foods for survival — agricultural products, wheat, etc.

To begin with, we can assume that the weights of the groups are identical, or in some other simplified form. For example :

Option 1: gold (50%); lithium and uranium (25%); cotton and maize (25%)

Option 2: gold (25%); lithium and uranium (25%); cotton and groundnuts (25%); maize and rice (25%)

The initial value or the price of the basket, i.e. of the physical amounts of goods that the notes will cover, can be determined by the following procedure: first, the new regional currency will be defined as

1000 SHL = 500 SHL (expressed in grams of physical gold)

+ 250 SHL (expressed in equal parts in physical amounts: kg. of lithium and lb. of uranium)

+ 250 SHL (also expressed in pounds of cotton and pounds/ton of corn).

In order to set the initial physical amounts of the basket, it is necessary to know the market prices of the raw materials included and to predict their movements in the future based on futures contracts on commodity exchanges. This will enable experts to determine the amounts of the initial stock to be stored, as well as the long-term price of the basket, which will be revised at certain intervals¹⁶ .

For purely practical reasons, we can assume that 1000 SHL = 1000 USD. In Option 2, for example, if we take the beginning of July 2024 and the price of gold quoted in USD, then 500 USD or 500 SHL represent approximately 7 grams of standard gold. The other components would be defined in the same way. For example, at the beginning of July, USD 250 (or SHL 250) represents 10 kg of lithium and 1.5 lb of uranium¹⁷. The remaining USD 250 (or SHL 250) in the basket represents 1.5 pounds of cotton and 0.5 tonnes of maize.

In this market and weight configuration, if, for example, the new system was launched today, the definition in the Regional Banks Act would read roughly as follows:

“The SHL is the new currency of the ESA member countries. The ESA Central Bank undertakes to buy and sell SHL against a basket containing gold, lithium, uranium, cotton and maize, at the following rate (price) and in the following proportions:

1000 SHL = 7 g of gold + 10 kg of lithium + 1.5 lb of uranium + 1.5 lb of cotton + 0.5 t of maize”.

Consequently, every sum of SHL issued is calculated on the basis of the above-mentioned proportions of the physical amounts of the five basic products. For example, for 1 million SHL, documents will have to be filed for the possession of 700 grams of gold + 1 tonne of lithium + 150 pounds of uranium + 150 pounds of cotton + 50 tonnes of maize. Or, for 1 million SHF, the bank will have to provide certificates of access to 700 grams of gold + 1 tonne of lithium + 150 lbs of uranium + 150 lbs of cotton + 50 tonnes of maize. Beneficiaries can then transfer these certificates to their customers via accounting entries, or physically take the goods from the warehouses in order to consume them or use them in production. In exchange for these certificates of property rights, they go to the warehouse and receive the amounts given. In this way, there will always be cover for the issue of the new regional currency.

In addition to the fixed-price exchange rate, the basket will also have a market rate, which will be formed by the price movements of the basket components. Depending on whether the market price deviates upwards or downwards from the fixed price, arbitrageurs will buy, sell, disassemble and reassemble the basket. This will reduce or increase the amount of regional currency accordingly. A minor technical drawback is that these commodities are quoted on international markets mainly in USD and some in CNY (e.g. lithium), and the calculation of the market basket will depend on the exchange rate of the SHL against the USD and CNY¹⁸. In general, however, it can be assumed that the SHL will have a stable exchange rate because there are real resources behind it. In any case, modern technology makes it possible to constantly monitor all the information flows linked to the prices and amounts of commodities and the components of the basket of commodities. These flows will be concentrated in the new bank and all participants will be able to monitor them.

The most logical thing to do is to issue the new currency in banknotes in order to boost public confidence. Banknotes can be issued in denominations of SHL 50, SHL 100, SHL 1,000 and SHL 10,000, i.e. large denominations. With a digital version of the new common currency (CBDC, for example), and in the form of small denominations, it will become a greater threat to the national currency, as it will compete with it in retail payments. The public will have direct access to the new bank’s balance sheet. These are technical details that will need special discussion.

In any case, given the low nominal level of income, the new currency will be used mainly for large payments and for savings and investment. Conversely, the national currency (banknotes and coins) will remain domestic in nature and will circulate on the consumer market. The denominations of the national currency that will have their own name will be placed at a fixed rate of 1:1 to the SHL, in the series 1 SHL, 2 SHL, 5 SHL, 10 SHL and 20 SHL and their names will be chosen at national level. One can imagine the regional currency “SHL AES” and for the national currencies, “SHL Mali; SHL Burkina and the SHL Niger”, with some national symbols on the coins. The difference is that, while the large SHLs will have total coverage of commodities, the national currency will have a minimum coverage of 50% of SHLs and the rest will be made up of government debt securities, advances and refinancing from commercial banks. It is assumed that small-denomination notes of the national currency will not give rise to conversions because the reasons for their demand are essentially transactional. These will probably help in the fight against inflation thanks to the control of issuance.

The initial stage of the project, i.e. the accumulation of the initial stock in the warehouses, needs a delicate touch and is crucial to the success of the whole. It seems best to start with a small basket volume, which will increase as demand for the money grows. As we have pointed out, in order to stabilise demand, it could be announced from the outset that a certain proportion of the taxes of large companies, including those producing the goods in the basket, would have to be paid in new currency. In return for the sums they owe to the budget, that could be in the form of tax anticipations for one or more years, they would have to leave a combination of goods in the official warehouses or they present the certificates to these goods. As mentioned above, the bank will take a commission, based on the difference between the sale rate and the purchase rate, which can be respectively SHL 1050 for the sale and SHL 9950 for the purchase (i.e. +/- 5%). This commission will be used to finance the operation of the system.

With a different approach to stabilising the basket price, and therefore the general price level, it is possible to replicate the system of modern central banks for controlling the interbank rate, e.g. that with the ECB. In this case, it will be possible to organise regular auctions to buy the basket at the official fixed rate; there will be two ceiling rates and limits (deposit and credit) at which economic agents could deposit or receive the basket. In this way, the market rate for the basket would fluctuate within a narrow range around the official rate. The three exchange rate levels, the basket price (deposit, base and credit) will certainly remain constant over long periods of several years.