ECOWAS Battles For Single Currency

It is not surprising to many economists and students of Economics that at the end of the Convergence Council of Ministers and Governors of the Economic Community of West African States (ECOWAS) meeting in Abuja, Nigeria, the much touted introduction of single currency (Eco) for the five English-speaking West African countries has to be delayed for another six years.

The ECOWAS regional grouping expects that the Eco and the CFA franc will make it easier to adopt a single currency for the whole region by the close of the century.

A statement issued at the end of their meeting in Abuja said the leaders of the five countries — The Gambia, Ghana, Guinea, Nigeria and Sierra Leone — which form the West African Monetary Zone (WAMZ), now plan to introduce the currency by 2015.

The plan to launch the currency, to be named Eco, has been in progress since 2000, following the Accra Declaration and the Bamako Accord.

According to reports, the group attributed the delay in arriving at a single currency to the inability of member states to meet the convergence criteria, as well as the effect on the economies of the member states as a result of the global financial and economic crises.

But the global crisis did not begin five years ago, and so that should not be an excuse for the inability of the five English-speaking West African countries to introduce the currency.

The member states set out about 10 criteria for the attainment of a single currency, out of which four were considered as very primary and must thus be achieved by all member states.

The four primary criteria are a single digit inflation, budget deficit with a Gross Domestic Product (GDP) of not more than four per cent (excluding grants), central bank financing should not be more that 10 per cent of what the country earned as tax revenue and the reserves of the member countries should not be less than three months of export cover.

Apart from The Gambia, which, since 2006, has been able to achieve those enviable targets, none of the other members has come close to it. For example, Ghana’s rate of inflation has not gone below 10 per cent, while Nigeria, with the biggest economy in the sub-region, has a rate of inflation hovering around 13 per cent.

At a meeting of the Monetary Policy Committee (MPC) of the Bank of Ghana to review the economy for the first quarter of this year, the Governor of the bank, Dr Paul Acquah, admitted that “it is not possible to introduce the common currency for the five-member West African Monetary Zone (WAMZ) this year”, given the economic performance reported by all the countries so far.

The revised road map, as given out by the council, has it that between now and the first quarter of 2013, the map envisages the harmonisation of the regulatory and supervisory framework for banking and other financial institutions, the establishment of a payment system infrastructure for cross-border transactions, the completion of the payment system infrastructure in Guinea, The Gambia and Sierra Leone (countries lagging behind in e-payment) and the completion of the ongoing integration of the financial markets of the region

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As planned, by 2014, the legal instruments for the creation of the WAMZ would have been ratified. This will be followed the same year by the creation of the bank for the WAMZ, the WAMZ Secretariat, as well as the West African Financial Supervisory Agency.

Now, a monetary union for the countries of the zone is scheduled to be realised on or before 2015 before the introduction of the common currency in January 2015, to be followed by the withdrawal of the national currencies of the five constituent member states.

Also, contained in the road map are actions to be taken ahead of the new date, which include the review and harmonisation of the convergence criteria, the harmonisation of statistics, domestic policies and the legal, accounting and statistical framework of public finance.

The five West African countries were expected to replace their national currencies with the common currency in January 2003, but many factors combined to make the launch date unfeasible.

The date was shifted to December 2009, in the hope that things would have been better. But nothing is happening. The council has further recommended to change the date to January 2015.

With a new road map, what would be the guarantee that attaining a single currency by 2015 will be feasible?

For more than 30 years, West African citizens have not fully benefited from the protocol agreement on the free

movement of goods and services within the region.

This protocol was signed nearly 30 years ago. Bottlenecks at the borders of member states have hampered effective economic integration and West African leaders are very much aware.

The harassment meted out to business men and women, as well as individuals, at border points and posts and the numerous checkpoints are the order of the day on our highways.

In our banks, one can neither exchange Cedi to Naira, nor exchange the Cedi to Leone. If simple conversion cannot take place within our own banks, how can we work effectively towards harmonisation of our economies?

Any traveller to The Gambia, Nigeria or Liberia has to get dollars, pound sterling or euro. Why should that happen?

Again, for the sub-region to achieve the convergence criteria, the economic managers must be disciplined enough.

Printing of currencies without any backing, corruption and overspending on prepared government budgets are all ingredients for high inflation.

If member countries do not put their houses in order, the idea of a single currency will be nothing but a mirage.

The economies of the sub-region are heavily linked to the colonial masters, and until such a time that member states can faithfully trade with one another the road map that has been drawn up will forever be on paper as new dates will continually, be fixed.