Once again, West Africa’s laboured bid to forge economic integration came unstuck recently when the leaders failed to agree on a possible date for the introduction of a common currency for the sub-region. At a meeting of the 15-nation Economic Community of West African States held in Niamey, Niger Republic, the Nigerian President, Muhammadu Buhari, rightly warned of the need to tread with caution on the matter.
Needless to say that Buhari’s stance has thrown into uncertainty the prospect of speedily creating within the West African sub-region a framework for a stronger economic and political integration in the mould of what currently obtains in the European Union. This stems from the weight of Nigeria’s influence in the 42-year-old union. As the largest economy in Africa and thus a commanding figure in the sub-region, other members of the union look up to Nigeria for leadership and direction.
The Niamey meeting had hoped to achieve the single currency project by 2020, which would have been a befitting culmination of a 21-year journey that started at the 1999 ECOWAS summit of Lomé, the Togolese capital, where the idea was first mooted. Nigeria’s endorsement would certainly have given the body a new lease of life.
But this was not to be. Among reasons cited for not taking the single currency plunge for now – which can hardly be faulted – is the absence of the right fundamentals to build on. “Nigeria will caution against any position that pushes for a fast-track approach to monetary union, while neglecting fundamentals and other pertinent issues,” the President said. He cited constitutional issues in individual countries among other subsisting constraints that had also hindered progress in the past.
Yet, the necessity for a common currency in West Africa cannot be overemphasised. It will facilitate trade within a single monetary zone, especially for the English-speaking West African countries that include Nigeria, Liberia, Ghana, The Gambia and Sierra Leone, which are yet to experience such. Intra-Africa trade, which also applies to trade within the ECOWAS region, is rated very low, despite the importance of intra-regional trade in promoting economic growth and development. Jean-Louis Ekra, a former President of African Export-Import Bank, citing 2008 figures, said “… intra-regional trade stood at: 70 per cent in the EU; 32 per cent in North America; 47 per cent in developing Asia; and 10 per cent in Africa.”
Also, for the Francophone countries, whose monetary unit, the CFA franc, is guaranteed by France – with 50 per cent of their external reserves deposited in a special account held by the French treasury – a common currency will be an opportunity to throw off an imperialist yoke and chart a new course for themselves. So, while the English-speaking countries are trying to experience it for the first time, their French-speaking counterparts had already been deeply involved with a single currency system even before their independence from France.
Experts believe that, though there is the need for conversion criteria, the set bars appear too high for the members to scale. Part of the rules is that countries should achieve a single-digit inflation of five per cent or less. This is a tall order in a region that hardly engages in any serious manufacturing and relies heavily on imports – even of food – with the resultant high rates of inflation. In Nigeria, for instance, the rate of inflation stood at 16.05 per cent in July, according to the National Bureau of Statistics. This is worsened by unfavourable exchange rates among member countries.
Besides, the requirement of a budget deficit ratio to Gross Domestic Product of four per cent or less from member states is daunting and realistically unrealisable. On that score, Nigeria’s debt-to-GDP ratio stood at 18.60 per cent by 2016, up from 7.30 per cent in 2008. If Nigeria, with arguably the most decent debt-to-GDP-ratio, cannot scale that hurdle, then it is obvious that any decision to stick by the set criteria would amount to further delaying the single currency implementation date.
Difficulties experienced by ECOWAS in realising its common currency dream are not unusual. It took the European Union, founded in 1957, some 42 years to create a single currency – the euro – in January 1999, following the Maastricht Treaty of February 7, 1992. It should also be noted that, until the recent Brexit vote, the United Kingdom and Denmark were part of the EU despite not being in the euro zone. The same goes for countries such as Hungary, Czech Republic, Bulgaria, Romania, Croatia and Poland which are yet to meet the criteria for joining.
This means that all the West African countries do not necessarily have to be ready for the common currency programme to take off. Going forward, ECOWAS leaders need to reappraise the performance of the union so far and see what could be done to improve trade among members, pending the establishment of the common currency zone. A lot of extant barriers still need to be dismantled to facilitate cross-border trade, typified in the ugly experience of Nigerians in Ghana in setting up new business outfits. These can be streamlined by implementing political and economic policies or reforms, very importantly in the area of the Common External Tariff adopted in Dakar, Senegal in 2013.
Besides, a central monetary authority, the ECOWAS Central Bank, should also be on board. Member states, if they are serious about a common currency for the union, should take a second look at the set criteria. By the time some of these policies and decisions are implemented, and with greater commitment, ECOWAS will be moving closer to achieving the founding fathers’ vision of “a borderless region where the population has access to its abundant resources and is able to exploit same through the creation of opportunities under a sustainable environment.”
