On ECOWAS common currency
It was simply wise that at the fourth meeting of the Presidents’ Task Force on Economic Community of West African States, ECOWAS, Common Currency, President Muhammadu Buhari of Nigeria urged the member-countries to tread carefully on the targeted take–off in 2020. The President’s position is well advised based on the reasons he enumerated and the appropriate references to attempts at monetary union in other parts of the world, especially Europe. The attainment of the laudable goal depends on the political will of the leadership in member -countries to tackle the applicable domestic issues in governance and economics.
The Economic Community of West African states had made progress in many areas listed in the Treaty of May 28, 1975. There is already a West African passport and free movement of citizens across borders. In the past, Nigeria had cause to withdraw from the effort at a common currency and the reasons for Nigeria’s reluctance were well articulated. At the meeting held in Niamey Niger, however, Buhari told his counterparts that in all this time, none of the issues had been placed on the agenda for the task force to consider.
As he reeled the list of outstanding issues, the Nigerian leader reminded his colleagues of negligence. Since the common currency project was conceived, the prerequisite political and economic environment for attainment had been missing. These include the individual constitutions of member-countries and the management of their economies. Across the region, linkage with erstwhile colonial rulers and dependence on aid hinder formulation of the necessary macro-economic policies that will engender confidence in a common currency.
In the region, there are diverse and uncertain macro-economic indicators. The vestiges of colonialism exist in the taproot of these economies, giving rise to the Anglophone/Francophone dichotomy. While the former French colonies had their currencies aligned to the French currency, the former British colonies did and still do not have the shielding of the British Pound. With a voracious appetite for importation and the attendant balance of payments deficit, the Anglophone countries succumbed to international pressure and allowed a free fall in their currencies. Ghana was first and later when Nigeria adopted the Structural Adjustment Programme in 1986.
At present, across the region, there is unrealistic inflation based on flexible exchange regime. In all, President Buhari stated that there is no comprehensive picture of the state of preparedness of each country for monetary union. He then reiterated the decision of the leaders to retain previously established criteria in order to ensure credibility of the proposed common currency.
Years ago, in order to facilitate commerce in West Africa, by overcoming difficulties of monetary transaction needing to pass through Paris and London, some eminent Nigerians pioneered the establishment of a regional bank. In bringing together investors from the two linguistic blocs, their vision was a Banque D’Accord that evolved into Ecobank with a holding company in Lome and subsidiary banks in the member-countries of ECOWAS and beyond. Although the politics of Paris and London have dogged every stage of the history of the regional bank, it has gained considerable experience that would be useful for the realisation of a common currency for the region.
As a way forward, Buhari called for a thorough review of the convergence road map which will entail the work of a committee of experts (on each of the subject areas) to come up with details including cost, sources of funding and an acceptable time-frame. The requisite wide consultation must also involve Ministry of Finance, Tax Agencies, Customs, Immigration, and Parliamentary Groups. The member-countries would have to be committed to ratification and domestication of legal instruments and related protocols, as well as harmonisation of statistical systems, fiscal, trade and monetary policies.
The Nigerian leader also advised familiarisation with African Union’s Programme of monetary convergence that has set a deadline of 2034 for establishing regional banks as proposed by African Central Bank governors. It is to be watched if this target can be met. Since its formation by the Brazzaville Treaty in 1964, the Economic Community of Central African States is yet to achieve a Customs union. There is no plan for monetary union in the Common Market for East and Central Africa, established in 1994, the East African Community (revived in 2000), the dormant 1989 Arab Maghreb Union, the 1988 Community of Sahel-Saharan States, the Inter-Governmental Authority on Development (Horn of Africa) and the Southern African Development Community.
The President of the ECOWAS Commission, Marcel Alain de Souza, appropriately highlighted the pivotal role of Nigeria which constitutes more than 70 per cent of the region’s Gross Domestic Product and with an estimated population of 180 million. Many economists complain that the Naira has not been well managed especially with multiple exchange rates. The country is however determined to increase agricultural productivity to reduce food import bill. To achieve greater industrial production, there is need for improved infrastructure; especially in power and transportation.
There are many preliminary steps to be taken in member-countries before a monetary union can occur but many of them continue to shift positions on the criteria for convergence. The gauntlet thrown by Buhari for the West African Monetary Union countries to present a clear programme for getting weaned from the French Treasury is a daunting challenge for which there is no green light in the horizon. If there is the will in the leadership in each country, there is hope for a common currency for West Africa at some date. But certainly it cannot happen in the year 2020.
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