The Economic Community of West African States, Ecowas, has gone slow on the adoption of a common currency following divisions on its appropriateness for the region.
At the end of the 57th Summit of the Head of States and Government in Niamey, Niger, on Tuesday, the regional bloc’s leaders admitted the decision to launch the Eco may have been rushed.
For now, the Ecowas which comprises of 15 states, said it will take a gradual step towards launching one currency. Incoming chair of the bloc, Nigerian President Muhammadu Buhari had argued at the start of the Summit that the French-speaking countries in the bloc had made unilateral adoption of Eco, leaving out the rest.
A communique issued on September 8, said the postponement was done in order to consolidate the achievements and chart a new roadmap for the single currency programme.
“Member states are to be exempted from compliance with the convergence criteria in 2020, while also developing a new macroeconomic convergence and stability pact among the Ecowas member states.”
President Buhari had cautioned that the for the regional currency could be in serious jeopardy unless member states complied with agreed processes. He also expressed concern over the decision of francophone countries that form the West African Economic and Monetary Union to replace the CFA Franc with Eco ahead of the rest of member states.
“The premature adoption of the Eco by French speaking countries has unnecessarily heightened disaffection and mistrust among members of the emerging monetary union.”
President Buhari encouraged “UEMOA (French acronym for the West African Economic and Monetary Union)’’ to return to the roadmap on the common currency in the sub-region.”
The CFA Franc has been used by French-speaking countries since their independence years from France. But it was based on policy criticised as neo-colonial as they were required to deposit their national reserves with the French Central Bank.
Last year, the countries pushed for an end to that policy and launched local currency. English-speaking members, who have had their own currency, feel there have been insufficient controls to guide convertibility of their currencies to the new one.
President Buhari said stakeholders should “bear in mind that those economic convergence criteria must be based on sound and sustainable macroeconomic fundamentals.”
The gradual steps are now expected to address exchange rate mechanism; Stabilisation Fund to cushion the changeover; policy harmonisation to control reserves and exit strategy for those who had been using a different currency.
The region could look to the Euro which was launched in 1999 to replace the individual countries of the European Union. It took two years for the EU to introduce notes and coins as legal tender for the Euro Zone. Still, some countries like the UK [which has since left the EU], Sweden, Denmark, Czech Republic, Hungary, Poland, Bulgaria and Romania chose to stick to their national currencies.
The UK, for example while in the EU then refused to adopt the Euro because it felt the Euro was not flexible enough to deal with local and regional economic problems, the Euro could not create conducive investment environment in the UK and that it could hurt the competitiveness of the UK financial services providers
English speaking leaders have also felt the Eco was a project by the French and may not have been keen to achieve common economic goals for the region.
On Monday, Buhari alluded to this when he said: “Foreign interference and so-called advice may not be in our best sub-regional interest.”
The region, despite launching the Eco, has yet to delink the CFA Franc from the Euro, on whose convertibility it was based.
It was still unclear if all Ecowas member states should join the UEMOA or choose to do so as individual countries.
ECOWAS leaders had actually agreed on a single currency to be called Eco for the region 30 years ago to boost cross-border trade and economic development.
But the French speaking members of Ecowas with the supervision of President Emmanuel Macron of France in December 2019 launched the regional single currency and unilaterally converted CFA (French Franc) to Eco.
The move jolted other members of the 15-member bloc.
A member of Nigeria’s Economic Advisory Council (EAC), Bismarck Rewane, cautioned the nation against allowing itself “to be stampeded into making precipitated decisions on joining ‘Eco.”
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed had in a statement said Nigeria “is studying the situation and would respond in due course”.
She said in January 2020 while reacting to the action of the French speaking countries that the federal government had adopted a cautious approach to the adoption of ECO.