How would you feel, if you could travel through all the countries that make up the Economic Community of West African States (ECOWAS), spending only a single currency all the way on travel fares, hotel reservations, shopping, etc?
Without a doubt, you’d be delighted not having to do the exchange rate calculations fraught with risks. Just the act of changing from the naira to the CFA, the cedi, the leone, Guinean franc, the Liberian dollar, the dalasi, etc, is sufficient tedium. Hardly would anybody go through that if he had a choice.
Clearly, the option of a common currency for ECOWAS, the Eco as it has been named, is exciting and would bring the community closer. The founding fathers saw this some 40 years back and started working towards that.
So, when at the close of last year, the President of Cote d’Ivoire, Alassane Ouattara, together with the French President, Emmanuel Macron, announced that the CFA currency was going to be replaced by the Eco, many thought that the dream had finally come through. But the discerning noted that Abidjan was the wrong place for the announcement concerning the Eco. The non-CFA zone ECOWAS members hurriedly met in Abuja, and fired a salvo declaring that the move by Abidjan and company was a unilateral one. The fire was building between the two camps before the big global wave of coronavirus came crashing into the sub-region. But it remains a fight deferred till such a time that coronavirus surrenders the headlines.
ECOWAS has all it takes to become a regional marketplace for big business and globally lucrative commercial transactions with life-transforming implications to its hundreds of million citizens. And all it requires to access this phase of infinite socioeconomic prosperity is the harmonizing of the monetary and fiscal policies of member states in such ways as would facilitate the process of embracing the Eco.
ECOWAS had planned to introduce the Eco in 2003. But then it got postponed to 2005, then to 2010 and thereafter to 2015 with still no solid resolutions. The pussyfooting, at the time, was explained away in excuses about the then raging global and continental economic crises as well as disruptive interferences by former colonial powers.
To understand the complex nature of the monetary and statutory crises storming across the multilateral deliberations on the Eco currency, one has to appreciate the fact that, as at now, West Africa is divided into two main monetary blocs: member states of the francophone West African Economic and Monetary Union ( UEMOA), with CFA serving as their common currency, and the six non-CFA members forming the West African Monetary Zone (WAMZ).
The six countries under the WAMZ banner are: Gambia, Ghana, Guinea (Conakry), Liberia, Nigeria and Sierra Leone.
Countries making up UEMOA’s CFA zone are: Benin Republic, Burkina Faso, Cote d’Ivoire, Mali, Niger, Senegal and Togo. An odd, non-francophone member of the group is Guinea Bissau, a former Portuguese colony.
These two erstwhile opposing monetary blocs have, for long, enjoyed their respective spheres of influence rather complacently, with France insidiously guaranteeing the stability of the CFA while the WAMZ member states coped with the periodic storms of their economic and monetary sectors managed by their various central bankers.
Recent pan-African and anti-colonial moves have triggered anti-vassalage clamours across the sub-region with concerned patriots calling for a total breakaway from all tangles and vestiges of neocolonial interference in the economic and political directions of their respective peoples.
Such anti-colonial manifestations in the francophone zone have resulted in mass protests, especially in Senegal and Cote d’Ivoire. Much as all members of ECOWAS earnestly long to roll out a common currency throughout the sub-region, there are weighty monetary and fiscal hurdles to overcome before such a goal can be realized.
In the race for the Eco, there are macroeconomic convergence criteria that have to be met by each of the member states before the common currency can be adopted
Such criteria include:
•Sustaining single-digit inflation rate at the end of each year by each member state.
•Ensuring a fiscal deficit of not more than 4% of the Gross Domestic Product (GDP) of each member state.
•Limiting the central bank deficit to not more than 10% of the tax revenue of the preceding year, and
•Maintaining gross external reserves that can provide import cover for a minimum of three months.
The monetary and fiscal challenges also have to do with:
•Meeting tax revenue mark that is equal to or greater than 20% of the GDP
•Sustaining a wage bill to tax revenue that is equal to or less than 36% of the GDP
•Ensuring a stable exchange rate
•Ensuring public investment to tax revenue equals to or greater than 20%, and
•Prohibiting new domestic default payments and liquidating existing ones.
With devaluations that have dwarfed the value of the cedi and the frightening free fall of the naira from N165 to a dollar at the inception of the Buhari administration to about N400 to a dollar at present exchange rates, the appraisal rating of moves by member states to meet such criteria slumps off the mark. This discouraging development has been raising question marks as to the readiness or genuine commitment of ECOWAS to roll out the Eco currency.
A monetary, fiscal and commercial survey of the region highlights the fact that a major stumbling block in the way of implementing the single currency has to do with the lack of macroeconomic convergence. The sub-regional body is characterised by minimal trade convergence (low volume of trade among member countries) as against trade divergence (high volume of trade between member states and countries outside the sub-regional bloc).
Such economically baneful commercial exchanges that put ECOWAS members on the receiving end while enriching countries outside the bloc have disruptive socioeconomic and industrial implications across the region. This has been continually threatening the already weak socioeconomic links of member states. For where the value of trade convergence is not greater than the volume of trade divergence, the synergistic association of commercial, financial and fiscal institutions cannot be effected.
As a result, there can be no socioeconomic impetus to oil the wheels of sustainable economic integration. Holding a threatening noose over the Eco is the neocolonial policy by which the foreign exchange reserves of the UEMOA member countries are still being managed by foreign financial institutions. This exposes a caricature state of the so-called independence being peddled by such countries. Not being in full control of their respective monetary policies has been foisting on the Eco roundtable a bizarre baggage of neocolonial economic slavery which the non-CFA member states detest.
(To be continued)