The West African Monetary Zone (WAMZ), has stated that re-denomination of national currencies in the region was not inconsistent with the introduction of the West African currency, ECO, set to be rolled out in December 2009, in the five member-countries.
Briefing Journalists on WAMZ projects, Dr Ojo J. Nnanna, Director-General of WAMZ, said it was not true that re-denomination exercises hampered or would hamper the development trends of achieving the WAMZ targets.
'The European Union experiment is a typical example where despite re-denomination exercises by countries such as Germany and Turkey, France and others, they were able to meet the set targets and join the union.' Dr Nnanna argued that the use of national currencies was merely a stop-gap arrangement in the scheme of things.
'The re-denomination exercise in Ghana, for instance and the one proposed in Nigeria would not in anyway affect the process towards the achievement of the WAMZ convergence criteria.' Ghana on July 1, 2007, initiated a re-denomination exercise that cuts out four zeros from the figures.
He noted that the movement towards convergence had improved considerably since 2005, adding, 'I am happy to say that in 2006 two countries met the primary convergence criteria. Nigeria and Gambia met four while Ghana met two and Sierra Leone and Guinea one each.'
He expressed regret that Ghana had consistently failed to meet the inflation and budget deficit targets. 'I am however, impressed with recent developments of consistently reducing inflation figures and Government's adoption of prudent fiscal measures, which are intended to reduce budget deficits among others.'
He said a formal use of national currencies for cross-border transactions in the WAMZ had been approved by the WAMZ Convergence Council and currencies were convertible within the zone and could be used to finance goods and services. 'It implies that letters of credit can be opened in WAMZ national currencies for intra-regional imports and exports.'
Dr Nnanna said this decision was taken with the objective of promoting intra-trade in the WAMZ, which ranged from 5-8 per cent in 2006 compared with the over 20 per cent in the UEMOA zone, which groups French-speaking West African countries.
The WAMZ convergence criteria is for member states to have single-digit inflation rates, budget deficit, excluding grants, to GDP ratio to be equal to or less than 4.0 per cent, central bank financing of the budget deficit be equal to or less than 10 per cent of the previous year's tax revenue and maintaining reserves to cover at least three months of imports.
On the process of Capital Market Integration, Dr Nnanna said the ultimate goal of an integrated Regional Capital Market was to enhance investment and output by removing constraints in capital account convertibility in the WAMZ.
WAMI has consequently secured a grant support from the US Trade Development Agency to integrate the Ghanaian and Nigerian Stock Exchanges to facilitate cross listing and trading in the WAMZ.
'The integration process is progressing satisfactorily and ultimately the capital markets in The Gambia, Guinea and Sierra Leone will also be developed and integrated.'