AfDB approves $23m for West African Common Currency

Efforts by the West African Monetary Institute (WAMI) to promote the creation of a single currency in the sub-region received strong support last week.

The Board of Directors of the African Development Fund (ADF), approved US$ 23 million to finance part of the West African Monetary Zone (WAMZ) Payment System Development Project.

The project is an important regional financial infrastructural requirement for actualising the WAMZ by upgrading the payment systems in The Gambia, Guinea and Sierra Leone to the same level as those in Ghana and Nigeria, with a view to facilitating the harmonisation of the payment systems in five of the six member countries of WAMZ.

The main component of the project is the development of Real Time Gross Settlement (RTGS), a large value funds transfer system whereby financial intermediaries can settle inter-bank transfers continuously and in real time for their own account as well as the accounts of their customers in the three countries. The implementation of RTGS is expected to enhance the establishment of a West African Central Bank (WACB), which will, in turn, implement a regional RTGS system that will link the national RTGSs in its member countries in a “system of systems”.

The zonal RTGS will facilitate the efficient and safe transfer of funds among WAMZ member countries thereby stimulating trade in goods and services and the free movement of capital within the Zone. It will also interface with SWIFT (Society for Worldwide Inter-bank Financial Telecommunication) for sending and receiving payment messages. Apart from the RTGS, the project will assist the three countries to automate cheque processing, clearing house operations, the purchase and sale of government securities, and the upgrade of the backbone IT systems of their Central Banks.

The potential direct beneficiaries of the project include the central banks of the three countries, the commercial banks and other financial institutions, and government revenue agencies such as tax authorities and customs agencies. However, given the expected improvements in the efficiency of payments processing and funds transfers in the countries, the ultimate beneficiaries will be businesses and banking services users.