President Muhammadu Buhari has raised concerns over the planned single currency for the Economic Community of West African States (ECOWAS). He stated Nigeria’s position on the matter during a virtual extraordinary meeting of the Authority of Heads of State and Government of the West African Monetary Zone (WAMZ). Nigeria is not comfortable with the fact that the francophone countries, which are in majority, formed the West African Economic and Monetary Union to replace their common currency, the CFA Franc, with Eco without input from anglophone member states. As President Buhari rightly said, “we cannot ridicule ourselves by entering a union to disintegrate, potentially no sooner than we enter into it.”
Buhari’s statement showed that the member states were not on the same page before entering into the union of a single currency. They appeared to have left many things undone before coming up with the idea of a single currency for the sub-region. Without getting the buy-in of all member states, the plan to form a single monetary union cannot succeed. The absence of this synergy is already manifesting just one year after the plan to launch the Eco was mooted.
Considering the president’s reservation on the matter, we urge the ECOWAS member states to exercise restraint and iron out the grey areas before the single currency for the sub-region is established. The idea of having a single currency for the sub-region is good but all the member states must be carried along in conception and execution of the project. No group within the region can do it alone without the input of others.
Therefore, we enjoin all ECOWAS member states to properly evaluate all the conditions that each member state must meet before the implementation of the single currency for the region. There is no doubt the establishment of the single currency will be beneficial to all ECOWAS countries in terms of business, trade and industry. It will ease business transactions and movement of people in the sub-region. The single regional currency will ease the challenges often associated with the exchange of currencies in intra-area trade.
In addition, a single monetary union for the member states will unify the member states the more. But on the flip side, there are hard nuts to crack. For instance, will member states be willing to subordinate their national interests? This will entail surrendering their fiscal and monetary policies and sovereignty, including foreign reserves to the envisioned ECOWAS Central Bank, whose structure and form are not yet known.
Another tough requirement is that the accounts of every Central Bank of member state will be audited before the implementation of Eco currency takes effect. This may not happen in the foreseeable future. This is one issue Nigeria and other Anglophone member states may find difficult to surmount in adopting Eco as their national currency. This is probably one of the factors militating against the formation of a single regional currency. The initiative. which has been on the drawing board since the year 2000, has suffered many setbacks and postponements, because member states have failed to demonstrate enough political and economic will to see the project through.
Nonetheless, Nigeria’s fear is genuine and the hurdles to cross are many. These include harmonising the country’s banking and financial legislations in order to meet the Eco single currency realities. Another tough condition is that member states should have a single-digit inflation, a fiscal deficit of not more than four per cent, a Central Bank deficit financing of not more than 10 per cent of the previous year’s tax revenues and gross external reserves that can cater for import cover of at least three months.
Besides, each country is under strict obligation to sustain tax revenue equal or greater than 20 per cent of her GDP, have a wage bill to tax revenue that is equal or not less than 35 per cent, as well as public investment to tax revenue equal to or greater than 20 per cent. Also, a stable exchange rate is a mandatory requirement. For many member states, this is a tall order. For instance, Nigeria is currently deficient in almost all the criteria.
We maintain that though Nigeria accounts for about 73 per cent of the region’s total exports and a Gross Domestic Product (GDP) of $297billion, that does not make it safe now for her to belong to the Eco currency market, the obvious advantages notwithstanding. While the Federal Government works with other member states on how best to go with the formation of the single currency for the sub-region, we advise that it should, in the interim, look for alternatives to solve ECOWAS monetary and fiscal challenges. It must further improve the Ease of Doing Business, aggressively diversify the economy, broaden the revenue base and strengthen other regulatory frameworks that will stimulate economic growth and development.
