At the 55th ordinary session of the Economic Community of West African States (ECOWAS) in July 2019, the 15-member regional group agreed to adopt a new currency, the “ECO”, in January 2020.
The leaders believed that business people and travellers would be freed from the hassles of exchanging currencies; that trade will boom, and an integrated and prosperous region will flourish.
However, the January 2020 date was not met due to a number of contradictions.
Recently, finance ministers and central bank governors from the member states, met in Abuja and, again, indicated plans to inaugurate the single currency initiative to propel economic growth and development throughout West Africa.
The meeting marked a milestone on the path towards realising this ambitious goal, setting a target of 2027 for take-off.
The plan received the prompt endorsement of Nigeria.
The single currency is part of the features in the three-in-one identity cards planned by the National Identity Management Commission and set for roll-out in August.
A statement by the Ministry of Finance emphasised Nigeria’s unwavering commitment to its successful implementation.
The statement said the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, noted the critical role ECO would play in fostering economic growth and development in the sub-region.
It said that participants at the meeting went through the preparations for the single currency’s introduction, laying the groundwork for a more integrated economic future for ECOWAS member states.
“The vision for the ECO extends beyond a mere currency. It aspires to become a cornerstone of economic integration, streamlining trade and bolstering monetary stability across the region,” it said.
The gathering brought together key players instrumental in making this vision a reality.
They include the Minister of Finance of Cape Verde, Mr Olavo Correia, the Minister of Finance and Economic Affairs of Cote d’Ivoire, Mr Adama Coulibaly, and the Ghanaian Minister of Finance, Mr Mohammed Amin Adam among other representatives.
They formed a collaborative force dedicated to shaping the future of West African economy.
However, there are concerns about the practicability of the ECO initiative.
Some stakeholders believe that in this age national sovereignty is more important than cross-border collaboration.
With secessionist tendencies in the Alliance of Sahel States, double-digit inflation in Ghana and Nigeria, and public debt reaching record levels, the ECO initiative does not look realistic by 2027 as planned.
The President of Capital Market Academics of Nigeria, Prof. Uche Uwaleke, cautioned that if the experience of the Eurozone was any guide, there were enormous bottlenecks to be surmounted for the target date of 2027 to be realistic.
“Unfortunately, it does seem that the target looks unrealistic. ECOWAS appears fragmented with the exit of three of her members.
“Virtually all member-states are far from meeting the primary convergence criteria set by the West African Monetary Institute.
“In the case of Nigeria, the leading economy in the region in terms of Gross Domestic Product (GDP) size, inflation rate has been double digit for many years.
“Actual budget deficit as a percentage of GDP has been more than four per cent, and the CBN direct financing of fiscal deficits has been in excess of 10 per cent,” he said.
According to him, it is the same story with several other member-states that cannot boast of gross external reserves capable of financing three months imports.
“There is equally the fact that France is not supporting the French speaking member States, UEMOA, to have independent central banks.
“Against this backdrop, the first task for ECOWAS in the direction of a single currency is to unite politically, lure back the three countries that exited into their fold and then support each other to strengthen their domestic economies.
“Any attempt to inaugurate a single currency without ECOWAS first putting its house in order will witness a still-birth project,” he said.
He, however, said that Nigeria was positioned to reap immense benefits from the ECO initiative.
He said that if actualiseed, ECO would facilitate free trade within the sub-region, which would greatly benefit Nigeria as the largest economy in the sub-region.
“It is a no-brainer that a single currency for the ECOWAS will facilitate free movement of goods, integration of capital markets, and economic integration in general.
“Given her huge population, Nigeria is positioned to benefit most from the free movement of goods and persons resulting from the implementation of a single currency.
“It will enhance capital formation and lead to increased volume of trade among member-states, expanding job opportunities and enabling growth and development in the region,” he said.
An Economist, Dr Chijioke Ekechukwu, said that having a single currency for West African countries is in agreement with the Free Trade Agreements of ECOWAS and AfCFTA.
According to Ekechukwu, it will enable member countries to trade easily with one another and foster and grow trade and business relationships among themselves.
“Having a common currency will remove the bottleneck in currency exchange.
“On the issues of value of the Naira being lower than CEFA, this will be harmonised by the forth coming ECOWAS Central Bank.
“This was made possible when European countries floated Euro currency.
“There has to be a Central Bank to take charge of responsibilities of monetary policy having at the back of their minds the position of France on this single currency effort,” he said.
The Director-General, West African Monetary Zone (WAMZ), Olorunsola Olowofeso, however, said that expectation for an ECOWAS single currency by 2027 was no longer realistic.
Olowofeso said this was due to the inability of all the WAMZ member states to meet all the required criteria.
WAMZ is a group of six Anglophone countries within ECOWAS formed in 2000. Member countries are Nigeria, the Gambia, Ghana, Guinea, Liberia, and Sierra Leone.
According to Olowofeso, it is unlikely that any of the member-states will satisfy all four primary convergence criteria on a sustainable basis between 2024 and 2026.
“The quest for a single currency by WAMZ will take much longer to achieve as the convergence indicators have declined significantly.
“The assessment of member states’ performance reveals that, as of June 2023, all member states failed to meet all the four primary convergence criteria.
“The zone’s performance score declined to 29.2 per cent, compared to 41.7 per cent during the same period in 2022,” he said.
A monetary union with a single currency for the 15 member states implies that governments will transfer a substantial part of monetary and national political authority to ECOWAS institutions.
This is most unlikely to be practicable as it would clash with economic independence and political sovereignty of member-states.
Also, the medium-term projections on macroeconomic convergence suggest that none of the member-states will be able to meet all the primary convergence criteria sustainably by 2027.
Kadiri Abdulrahman writes from News Agency of Nigeria
