Eight ECOWAS countries (Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo) jointly use the CFA franc. Establishing a new currency would involve dissolving the Dakar-based West African Central Bank BCEAO for the eight countries within the zone that use it and creating another one.
at the fourth meeting of the Presidential Task Force on the ECOWAS Currency Programme.
the west African countries are looking to form a trade bloc that could have a bigger say in international markets and promote a better economic outlook for the entire region.
The first step towards the economic integration of West Africa was the establishment of the Economic Community of West African States (ECOWAS) in 1975. In the same vein, the vision to introduce a common currency in the region started with the establishment of the Economic Community of West African States Monitoring Cooperation Program (EMCP) in 1987.
However, the deadline for the achievement of this goal which was initially slated for the year 2000 has continually been shifted, with the latest deadline being 2020. A more precise and strengthened decision to create a single monetary zone for West Africa was reached by the heads of state of 15 member countries at a summit of the Economic Community of West African States (ECOWAS), the region’s economic commission, in Lome, Togo in 1999.
To speed up the macroeconomic convergence necessary for a single currency across the entire sub-region, six anglophone heads of state met in Accra, Ghana in 2000 and agreed to create a second monetary zone for the anglophone countries, with the ultimate aim of merging with the francophone countries. The aim was to create a single and harmonized monetary union for all of West Africa by 2004.
The fight for a single currency has lingered since 2013, but a special summit appointed the presidents of Ghana and Niger to handle the introduction of the single currency in West Africa.
In 2013, ECOWAS tasked Niger and Ghana with “coordinating” the single-currency campaign, and in 2014, a “task force” was set up to provide them with guidance.
He said central bank governors of member states met yearly to analyse and review the level of progress of the currency process ahead of the implementation time.
A single currency could help address West Africa’s monetary problems, such as the lack of independence of central banks and non-convertibility of some currencies. Ultimately, a single currency and its associated regional institutions could also boost investor confidence and promote trade within the sub-region.
West Africa is adopting a single currency in the next three years as part of moves to achieve a strong and singular trade facilitation regime. It also forms part of efforts to present the whole of West Africa as an economic regional force in Africa and the rest of the world. He said that through the common currency, the commission hoped to support the regional economy to be more integrated and have a strong exchange among member states.
“More states have to comply with some macroeconomic criteria like inflation, budget deficit, currency stability; without this, if we set up a common currency, it will fail.”
First, it requires all countries to achieve a single digit inflation of 5% or less, which is a difficult task. In Ghana, data shows that the average yearly inflation between 2000 and 2016 was 16.92%, which is far from a single digit. Nigeria, the largest economy in the region, recorded an average inflation of 11.92% between 2003 and 2016, a rate which far exceeds 5%.
The institute set out four primary convergence criteria and six secondary convergence criteria to achieve the goal. The primary criteria are single-digit inflation rate at the end of each year and fiscal deficit of not more than four per cent of Gross Domestic Product among member states.
Second, the regional economic body requires all member countries to achieve budget deficit to GDP ratios of 4% or lower before the single currency is launched. In other words, budget shortfalls should be 4% or less of the total market value of all goods and services produced in the respective member countries. It will take a miracle for this to happen by 2020, three years from now.
“From 2012 to 2016, none of our countries has been able to persistently uphold the prime criteria in the programme for macro-economic convergence,” Marcel de Souza, president of the ECOWAS Commission, told a summit in Niamey, the capital of Niger.
failures to harmonise monetary policies between the eight currencies used by ECOWAS economies, and to set up a “monetary institute” — a forerunner of a common central bank.
some of the obstacles to realising the roadmap for the implementation of a single currency include diverse and uncertain macro-economic fundamentals of many countries, unrealistic inflation targeting based on flexible exchange rate regime and inconsistency with the African Monetary Co-operation Programme.
He cited the challenges faced by the European Union in realising the same goal to buttress his position.
Another major negative implication is that African countries scarcely trade with one another, loss of monetary sovereignty, etc. Overseas trade represents 80% of total trade on the continent. Trade between African countries accounts for a woeful 10.
Liberia too. “Nigeria will caution against any position that pushes for a fast-track approach to monetary union, while neglecting fundamentals and other pertinent issues,” said Muhamadu Buhari.
The Presidential Task Force on common currency for the West African Monetary Zone (WAMZ) converged on the capital of Niger with the agenda of quickening the process of achieving this goal.
The outcome of the crucial meeting was captured in a communique which said that the ministerial committee had been instructed to meet within three months to propose a new road map to accelerate the creation of the single currency by 2020.
The communique also said that a framework had been agreed that would facilitate a gradual approach, where a few countries which are ready can start the monetary union, with other countries joining later.
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