ECOWAS Single Currency: Hope May Seem Dim, As Proposed Currency Value Poses Big Challenge
BY: Theresa Igata
As we look ahead to the December meeting of the ECOWAS Presidential Task Force to achieve the 2020 target for a monetary union, one big issue that is paramount and of course likely to be a big problem is finding a value for the proposed ECO single currency for ECOWAS member states, which according to economic experts may likely affect the takeoff of the project.
Akpan Ekpo, Director General, West Africa Institute for Financial and Economic Management, WAIFEM disclosed to Political Economist magazine in an interview, that if the proposed currency is realised, it will be at parity with the pound sterling, Euro or the Dollar, where the Central Bank will determine the value of the currency vis a vis the other currencies but that the issue of the single currency value will be a big problem and may hamper the process.
He added that where the regional Central Bank will be situated is already being worked out.
How ready are member state countries to see to the actualisation of the project, since some are yet to meet with the criteria set by ECOWAS for each country?
It would be recalled that the ECOWAS authority had approved the reduction of the macroeconomic convergence criteria from 11 (four primary and seven secondary) to six (three primary and three secondary), according to reports.
The three primary criteria being used are: a budget deficit of not more than three per cent; average annual inflation of less than 10 per cent with a long term goal of not more than five per cent by 2019; and gross reserves that can finance at least three months of imports.
The three secondary convergence criteria are public debt/Gross Domestic Product of not more than 70 per cent; central bank financing of budget deficit should not be more than 10 per cent of previous year’s tax revenue; and nominal exchange rate variation of plus or minus 10 per cent.
Ekpo noted that the reduction in the criteria from 11 to 6 was in order, where the primary criteria are being retained. He however said the secondary criteria were too complex and demanding and too unrealistic.
On whether or not the 3.4 per cent growth rate projected for the ECOWAS region in 2019 against three per cent experienced in 2018 would be achieved, Ekpo expressed optimism that it was feasible, but only if efforts are made by ECOWAS countries to diversify their economies making them more productive. “Efforts must be made to industrialise, he said.”
It would also be recalled that the ECOWAS President, Mr Jean-Claude Brou had said that six member-states (Benin, Burkina Faso, Cape Verde, Niger, Ghana and Senegal) recorded growth rates of more than six per cent in 2018.
On the Common External Tariff, CET, which was enacted to help increase Intra-regional trade, availability of goods and to guarantee predictability and stability in trade etc. amongst member states, he expressed hope that other countries will join soon as only two countries ( Ghana and Sierra Leone) are currently implementing the CET within the African Monetary Zone, WAMZ.