At the recently concluded ECOWAS meeting in Niamey, Niger, President Muhammadu Buhari advised against undue haste in integrating economies and currencies.
In ECOWAS, when Nigeria speaks, other member states listen.
We endorse Nigeria’s counsel to ECOWAS to make haste slowly in this question of monetary integration. With a projected population of 183 million, and constituting more than 70 percent of the GDP of the West African region, Nigeria has a huge stake in when, how and in what circumstances the ECOWAS single currency comes into being.
We also note and stress that Nigeria’s position, as we understand it, is NOT rejection of the ECOWAS Single Currency project (as erroneously reported by several non-discerning Nigerian media), but caution against hasty implementation. Buhari’s reservations can be summed up in fewer words: inadequate preparedness of individual countries for monetary integration in 2020.
We recall that the launch of ECOWAS’ travellers cheques (ETC) in Abuja on October 30, 1998 by ECOWAS Heads of State was meant to be a forerunner and a fitting prelude to the launch of the ECOWAS common currency.
However, about two years after its launch, the ETC collapsed.The same fate threatens to befall the ECOWAS common currency project, if wise counseling is not heeded.
In 2000, as the sub-region’s travellers cheques were collapsing, member states agreed to speed up the process of monetary integration via a project for the two-phased creation of a single currency in West Africa.
Under this plan, in its first phase, a single currency called ECO was to be launched in 2015 by The Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone – Member States of the West African Monetary Zone (WAMZ). All have national currencies that are not freely convertible among the countries.
In the second phase, WAMZ was to merge with the eight countries in the West African Monetary Union (WAMU) to create a single currency in all 15 ECOWAS Member States in 2020. WAMU comprises Benin, Burkina Faso, Cote d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo. These countries use the CFA franc moored to the single European currency.
After three postponements of the launch of the ECO — in 2003, 2005 and 2009 – ECOWAS finally in July 2014 gave up its launch in January 2015, due to insufficient preparation and economic convergence among countries. They also decided to change strategy, abandoning the interim stage of 2015 (with a single currency in WAMU) and rescheduling for 2020, the creation of a single currency in the whole ECOWAS.
For one thing, the traveller’s cheques scheme collapsed largely because of insufficient communication and information in the direction of the populations, parliaments and private sector to consolidate support for it. Drawing on this , the Nigerian Expression calls for vigorous sensitisation campaigns in all ECOWAS countries for the success of the monetary integration project.
Secondly, the issue of exchange regime is not a simple one given the diversity of monetary regimes in force in West Africa. They vary from the CFA’s fixed exchange regime pegged to the Euro, to the flexible regime in Nigeria and other non-CFA countries, having the dollar generally as reference currency.
Thirdly, under the ECOWAS single currency roadmap, exchange rates are expected to stabilise in 2018, two years before the single currency is launched as scheduled in 2020. But there remain unanswered questions: are we heading for a fixed or flexible exchange regime? Will the ECOWAS single currency be pegged to a reference currency or a basket of currencies? What adjustment mechanism will help address the impossibility for countries to individually use the exchange rate as variable for adjusting shocks?
The President of the Commission of ECOWAS, Marcel de Souza, has himself spoken of poor macro-economic convergence in the sub-region and warned that an immediate transition to the single currency would present grave consequences for the sub-region.
We should heed the calls of Presidents Buhari and De Souza.
The ECOWAS single currency project is noble, laudable and achievable and should continue to be guided and cautiously supported by Nigeria, a founder and a major pillar of the regional economic community.