ECOWAS' Single Currency Agenda
Dr Ibn Chambas COME December 1, 2009, the Eco, the name given to the proposed single currency in ECOWAS, will be legal tender across the length and breadth of West African Monetary Zone (WAMZ) countries.
The Eco will run side by side with the CFA Franc of the French-speaking countries (without Guinea and Mauritania) otherwise called the UEMOA countries.
It is expected that in the year 2020, the two common currencies would converge and assume the name Eco for the whole of ECOWAS.
The West African Monetary Agency (WAMA), consisting of governors of the regional Central Banks, disclosed in Abuja, Lagos that not all member-states may join at the take-off date because of their levels of implementation of the convergence criteria. But they may join later when they meet up with the requirements.
The agreement on the new date was among the highpoints of the 36th WAMA meeting in Abuja where members reviewed the progress by member states on the convergence criteria issues.
Banking staffs and students pursuing banking and finance, in a few years, should be in positions of responsibility to drive banking business in Eco notes and coins.
ECOWAS took root on 28th May 1975 when the Founding Heads of States converged on Lagos to sign the treaty with the laudable objectives to among other things use a single currency to facilitate trade and ease bottlenecks in the international balance of payments.
Clearly, the single currency had been one of the cardinal objectives of ECOWAS from its inception. Single currency is the icing on the cake of monetary integration which itself, is a subset of economic integration.
In other places, similar trade blocs exist such as the European Union (EU), North American Free Trade Area (NAFTA), Association of South East Asian Nations (ASEAN) and Asia-Pacific Economic Co-operation (APEC) amongst others. In Southern Africa, there is the Common Monetary Area (CMA) or Rand Area comprising South Africa, Namibia, Lesotho and Swaziland.
All CFA Zone countries are French-speaking. Other French-speaking countries not in the arrangement are Cape Verde, which has an observer status in the WAMZ, Guinea which decided not to be part of the CFA but WAMZ and Mauritania which stands alone and is satisfied with its currency, “Ouguiya”.
Liberia is English-speaking but appears for now satisfied with its currency, the Liberian dollar while remaining as an observer in WAMZ.
Overall, there are 16 countries in the West African sub-region. The CFA countries have a common Central Bank called Banque Centrale des Etats de l' quest (BCEAO). CFA Franc was put in place by the French Government for its colonies in 1945 just as the British Government established the West African Currency Board in 1912 to print Pound Sterling for its colonies.
The French-speaking countries achieved monetary integration normally in 1994 and leveraged on the CFA Franc already in use as their single currency. They constitute the First Monetary Zone.
The English-speaking countries were also eager to achieve monetary integration like their French-speaking counterparts. ECOWAS now grouped them together as WAMZ and set up the West African Monetary Institute (WAMI) to shepherd them successfully to a common currency called Eco. Specific conditions called convergence criteria were stated for compliance by the converging WAMZ countries.
The Accra Declaration of 20th April 2000 by the Authority of Heads of State and Government of WAMZ outlined the following primary convergence criteria that should be assiduously pursued and met by all the WAMZ countries willing to join in the single currency project: The primary convergence criteria are:
A single digit inflation rate by year 2000 and five percent rate by year 2003. The second one is the budget deficit (excluding grants) to GDP ratio of not more than five percent by year 2000 and four percent by year 2002.
The third criteria is that the Central Bank financing of budget deficit should be limited to 10 percent of previous year's tax revenue while the fourth one states that gross external reserves of a member country should cover at least three months of imports by end of year 2000 and six months by end of year 2003.
The single currency, Eco, was initially programmed to commence in 2003. No country had achieved the primary convergence criteria then. The Authority of Heads of State and Governments moved it to 1st July 2005.
The West African Monetary Institute set up in March 2001 to undertake all preparatory works for the introduction of Eco notes and coins in the WAMZ countries as planned.
Member states were required to draw up a programme for meeting the criteria and to mount a sensitization blitz amongst its citizenry. Since only the Gambia and Nigeria met the primary convergence criteria as at 2006, the Authority of the Heads of State and Governments resolved that the commencement date for the Eco be shifted again to December 1, 2009.By Felix Dela Klutse