“We must accept that WA Monetary Union in 2020 is not a possibility,” AfDB Chief

The Africa Development Bank (AfDB) on Tuesday launched two reports – the 2019 African Economic and West African Regional Economic Outlook, both of which provide detailed economic and social

analysis of key development trends across countries in the region, comparing progress over time while linking regional integration and the level of economic transformation in different countries. At the launch, EBRIMA FAAL, Senior Director, AfDB, Nigeria Country Department, briefly spoke to ONYINYE NWACHUKWU, Businessday’s Abuja Bureau Chief andCYNTHIA EGBOBOH on major 

highlights of these reports. Faal says that Nigeria must move faster with growth to facilitate economic expansion in the region and particularly expressed fears that the 2020 West African Monetary
Union deadline may not happen. He further advised on the need to draw lessons from mega regional blocks such as the European Union and current challenges presented by BREXIT. EXCERPTS…

Give us quick highlights of the 2019 Economic outlook for Africa and West Africa just launched the two reports are part of the knowledge reports that the bank produces every year and this is the 19th year of production for Africa economic and for the regional, we just started it last year. Essentially, what we are trying to do, is to do a comprehensive review and analysis of the economies of the member countries of the entire African continent and support that with the regional analysis that gives a more granular look at activities in the countries.

We have also tried to make the report readily available by putting them in the most popular languages across the continent, we are doing eight languages now. It is a report that is well received, this year’s version we decided to launch the West African version in Abuja.The main highlights really are that; the region is growing at the rate of 3.5 percent, interest rate is coming down not as quickly as we would like to see, but it has come down significantly. Fiscal deficits are still on the high side, we have seen some improvement in some countries including Nigeria and external balances are still in deficit as well. So it’s sort of a mixed bag of results. In terms of Nigeria in particular, we have seen recovery from the recession since 2016.

Last year we recorded a growth of about1.9 percent, we have seen some very encouraging signs during the report which is that the big risk going into 2019 was the election and I think that has at least panned out okay. Interestingly, I was in Lagos last week and a lot of the big hotels were actually 100 percent booked, and that is an indication of investments coming back into the country.We see over the medium term that growth is improving for Nigeria, we also note that the elections went well which reduces risk, we are also beginning to see sort of more steadfast and accelerated implementation of the ERGP. Other things are good, not only for Nigeria but because Nigeria is 75 percent of the region, it is good for the region.

If you look at the regional growth before 2017, it actually was declining very quickly and that is because of the Nigerian recession. So, I think prospects are looking good, they are important downside risks, including the fact that commodity prices could reverse and there is a small improvement happening now. Two, we in some countries that debt is increasing in the level of external debt in particular but also very importantly in Nigeria, for example, domestic debt, we don’t think that it has reached crisis level or systemic lead to crisis at the moment, but the trend is a bit worrying and we really need to watch that very carefully.

Is there a concern for you, or the Bank around the fact that Africa is still dependent on what goes on in the commodity markets, how can we begin to move out of this circle? It is a concern, we note that even when Africa was growing, the region was growing at 5 percent or more, we were not seeing it transform into jobs for example or reducing poverty levels and from the analysis that we have done and what others have done, we discover that a lot of that is that we are still producing primary commodities and we are not transforming those commodities.

So on the bank side when Adesina came in, we sort o9f focused on some priorities, one was, of course, the “feed Africa” which is agriculture and the second is “industrialize Africa”, which is trying to make sure that not only do we grow agriculture but how do we then transform that agriculture into finished products that are manufactured. So in the process, as you move from primary production in agriculture towards industrialization, there is a whole lot of jobs that have been created, whether in the services sector, distribution and actual manufacturing itself.

So, I think this is where we have been advising our member countries to move across the whole value chain and not just to move and improve the value chain in cassava, cashew nuts etc to but also ensure that we are linking up to other international and global value chain realizing this is the only way we can create sustainable jobs. How huge is the impact of the Nigeria fragile growth on the entire African economy? It is cyclical, let’s go back before 2016 when Nigeria was growing really fast, I think the average growth was an about5-6 percent or so at the time.

At that time, the region was enjoying also Nigeria’s rapid growth. So as Nigeria fell in the down cycle, then everybody in the region felt it and it is not just the region but the continent. When Nigeria, Angola and South Africa grow, the African continent also grows. So I don’t think of it as a problem, the fact of life is that the economies will always go in cycles, so we just try to make sure that the down cycle is not as long or as deep as it can be.

And in the case of Nigeria really, it wasn’t a really long down deep cycle, it was a deep cycle but then it rebounded quite quickly and that is good news for the region. There was some other very good performance like I said in my introduction, Ivory Coast is growing at 7.4 percent, Senegal growing at 7 percent and what we are seeing in those countries is that they have over the last five years invested heavily in infrastructure and then the benefits of that they are now beginning to reap.

What potential do you think the Continental Free Area Agreement holds for the continent, how would you advice countries to sign on, going forward?The Continental Free Trade is important, as you saw in the presentation. If you take the whole of Africa with fragmented markets, one country in Europe has a higher economy than the whole of Africa, that is clearly unacceptable. So trade and regional connectivity infrastructure are important and I think that the ACFTA is quite important in that regard. I think it is a process, countries have to go through their own internal review processes, have to go their legislatures and cabinets before they can approve it.

I am confident that in no distant future, Nigeria will be on board after it has done its own due-diligence so to speak, but a lot of big countries are already in SouthAfrica and others. And Nigerian government has said that once they have completed their studies at the right time, they will also be joining but I think they know of course the importance of CFTA.

West African economies have set a 2020 deadline for monetary union, what lessons do you think we should learn from Brexit as we progress? Well, from Brexit, we are not there yet in terms of having that kind of union. What I was saying in the presentation was that the head of states at theECOWAS have said that by2020, we should have a single currency for the West African region. Now, any economist will tell you that to have a monetary union, the economies comprising that union must have the same macroeconomic variables such as the deficit, growth, inflation, interest rates, all of that must converge and that is not happening in West Africa yet.

Their fiscal deficits are all over the place, inflation is about 12percent in Nigeria and higher in some countries. Debt and deficit levels are also extremely high, so there is no convergence, there is a lot of asymmetry in terms of the macroeconomic variables and I think that if we are having an honest conversation, we must have to accept that monetary union in 2020 is not a possibility. So far, not many people are saying it, but that’s a reality.