The idea for the implementation of a single currency (ECO) for member nations of the Economic Community of West Africa States (ECOWAS), seems to be gathering momentum as plans are well into execution and technicalities for its success has been reviewed.
Ministers of Finance and Central Bank Governors of ECOWAS member states met recently so as to review and assess prescribed progressional criteria and fine-tune the framework and financial technicalities required for a monetary union.
In an official statement furnished by the regional body, it stated that “The meeting is aimed at discussing the findings of a study commissioned to address key issues confronting the process leading to the establishment of a momentary union in the ECOWAS Region namely: the exchange rate regime, momentary policy framework and the model of the future ECOWAS Central Bank.”
It can be recalled that in 2001, the West African Monetary Institute (WAMI) was set up by the regional body (ECOWAS) as a provisional organization to facilitate the creation of a West African Central Bank. The body was also tasked to provide a framework for Central Banks of member states to start the integration and begin preliminary preparations for the printing and minting of the physical money to be known as the ‘ECO’.
‘ECO ‘ the adopted name for the ECOWAS singular currency was initially planned to be introduced in 2003 but was deferred at various times, to 2005, 2010 and 2014 without much success. However, in February 2018 ECOWAS declared its intention to advance the “ECO” course with an introduction in 2020.
For the successful implementation of the singular currency, ten criteria were outlined by the West African Money Institute (WAMI). These criteria are divided into four primaries and six secondary criteria.
This position was restated again by the president of the ECOWAS Commission, Jean-Claude Brou in June 2019. In his words “Respecting the timetable for the implementation of the single currency will depend on the efforts of each country in this area.”
The four primary criteria are:
1) A single-digit inflation rate achieved at the end of each year,
2) A fiscal deficit of no more than 4% of the GDP,
3) A central bank deficit-financing of no more than 10% of the previous year’s tax revenues
4) Gross external reserves that can give import cover for a minimum of three months.
The six secondary criteria are:
- Prohibition of new domestic default payments and liquidation of existing ones.
- Tax revenue should be equal to or greater than 20 percent of the GDP.
- Wage bill to tax revenue equal to or less than 35 percent.
- Public investment to tax revenue equal to or greater than 20 percent.
- A stable real exchange rate.
- A positive real interest rate
Achieving these criteria (especially the primary four) proves to be a major challenge for member nations. However, it is hoped that the perceived benefit accruable from the implementation of a singular currency will propel member nations to work in urgency and see that these criteria are achieved and other necessary requirements met.
The ability of African leaders and governments to achieve these feet will rest solely on how fierce they can be in the face of foreign influence. This move means unity for the African people, and there are forces outside our walls who will do anything to stop this project – no wonder it has met stumbling blocks since the inception of the idea.
But no matter the setbacks, this is a worthy course for all Africans to support and be proud of. The future is going to be bright. We will win this fight.