Earlier this year, the 15 member countries of the Economic Community of West African States (ECOWAS) made progress on an arrangement first proposed 30 years ago which would see all ECOWAS countries adopt a single currency for trade — the “ECO”.
The single currency regime is expected to be based on a flexible exchange rate regime, with an inflation-focused monetary policy framework.
The purpose of this move is to boost cross-border trade and economic development in the African sub-region and the new single-currency is supposed to come into use from next year.
But that seems unlikely following the findings from a meeting of the ECOWAS Committee of Ministers of Finance and Governors of Central Banks on the currency programme. And that’s because at the moment, of all the member states, only Togo has met all the convergence criteria.
Thus, the single currency regime for West Africa Countries might not kick off next year, or perhaps anytime soon, because many countries are yet to meet the criteria for the monetary alliance.
The ECOWAS had put up three primary and three secondary criteria that each country must achieve to be included in the monetary union.
- a budget deficit of not more than 3 percent;
- average annual inflation of less than 10 percent with a long-term goal of not more than 5 percent; and
- gross reserves that could finance at least three months of imports.
- public debt/Gross Domestic Product of not more than 70 percent;
- central bank financing of budget deficit should not be more than 10 percent of previous year’s tax revenue; and
- nominal exchange rate variation of plus or minus 10 percent.
Zainab Ahmed, Nigeria’s Minister of Finance, Budget and National Planning, while speaking at the opening session of the meeting of ECOWAS Committee of Ministers of Finance and Governors of Central Banks, stated that with only Togo meeting the criteria in the last two years, it would be difficult to operationalise the single-currency regime by next year.
“We need to address in an optimal way the challenges ahead of us. This meeting is important because we are at a crossroads. The recommendations we make will have significant implications on the monetary policies we undertake,” said Ahmed.
She added that the inability of other countries in the sub-region to achieve the criteria would make the adoption of the “Eco” currency in 2020 unfeasible.
Featured Image Courtesy: DW