Doubts About ECOWAS Monetary Union

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There are indications that Nigeria may not benefit much from the proposed West African Monetary Zone, which is scheduled to begin in 2020

|  By Olu Ojewale  |  Feb. 11, 2013 @ 01:00 GMT

THE lofty idea of the Economic Community of West African States, ECOWAS, to have a common currency for the sub-region by 2020 remains suspect. A good number of Nigerian stakeholders are sceptical about its benefits to the country, even as the country leads the campaign for the proposed West Africa Monetary Zone, WAMZ.

Isah Okpe, a senior lecturer, Department of Economics, Benue State University, Makurdi, said that the success of the programme would depend on the political will of every member state towards the monetary union. Okpe asked whether Nigeria economy, which is the largest in the sub-region, would be ready to shoulder the weight of sacrificing its huge potentials for a unified currency. “The benefit is that it would facilitate trade within the region. It would eradicate the bottleneck of changing your local currency to another each time you cross the border to another country. That would also reduce the pressure in terms of demand and supply on local currency,” Okpe said. Beyond that, the university don said it was yet to be seen whether every member state would be willing to cooperate fully to make it a success.

Ayo Teriba, the chief executive officer, Economic Associates, and member of the National Economic Intelligence Committee, said that the union, when implemented, would bring a big burden on Nigeria, considering that its economy constitutes about half of the economy of the whole West African sub-region. Teriba said one of the problems to be envisaged is the barrier on movement of goods and services as well as duties being paid for goods.

“There are still barriers on the movement of labour; you cannot just migrate to a neighbouring West African country and get a job easily. There is also no single financial system; a bank in Nigeria cannot do business in another West African country. You have to take these steps before talking about a single currency,” he said.

Apart from that, Teriba is worried that Nigeria gets less than what it offers other ECOWAS nations. “None of them is bringing something to the union. They would just merge and still be dependent on imports from Europe. So, I think Nigeria is better off on its own than joining such a union,” he said.

A senior journalist who wishes anonymity said it would be very difficult to achieve a single currency in West Africa, considering that the Francophone West African countries are solidly tied to the apron strings of the Central Bank of France. “This will make it difficult to get them to join the proposed monetary union,” he said.

According to him, the difficulties faced by the sub-region in the past 13 years to agree on the modalities for the union is enough to show that even the 2020 date might be a mirage. All the analysts agreed that Nigeria would carry the economic burden more than other countries in the region.

However, to fast track the process, there was the Convergence of Council of Finance Ministers and Governors of Central Banks of West Africa in Abuja on Friday, January 18. Speaking at the occasion, Ngozi Okonjo-Iweala, Nigeria’s minister of finance, said that the establishment of a single currency for West Africa would not be achievable merely by an Act, but with the active participation of the monetary authorities and “by market participants in order to make it viable and sustainable.” Okonjo-Iweala said it would be an illusion for anyone to think that the road to the monetary union would be smooth and easy. “The journey has not been smooth, will not always be smooth and there will be periods when our collective will will be tested,” she said.

Besides, she said all the member states would need political will, which is very critical for the implementation of the monetary union, and be committed to their responsibility. The minister said that the recent turbulence in the euro zone should teach the member states that “sustained convergence is the rock on which monetary union is built.”

Second, she said they must be ready to face tough fiscal rules, which are “necessary to lay the ground for a relatively homogenous fiscal zone.” In addition, Okonjo-Iweala said that a permanent funding mechanism contributed to by all members would be needed to enable countries have access to finance, if they cannot source it from the market. And above all, she said all the central banks must understand and accept their limits. Okonjo-Iweala urged member countries to have an abiding faith in the project, look at the future with optimism and never be in a hurry to achieve the results.

Kadre Ouedrago, President of the ECOWAS Commission, commended the effort of the WAMZ member states and promised the commission’s support towards establishing the monetary zone. Ouderago, who was represented by Ahmed Hamid, commissioner of Trade and Free Movement, urged member states to come together to discuss issues that would help to realise the common objective of the union.

At the 24th meeting of the Convergence Council of Ministers and Governors of the West African Monetary Zone, WAMZ, the Roadmap for the ECOWAS Single Currency Programme, was approved and adopted. According to the Roadmap, it was decided that the ECOWAS Monetary Union should be launched in 2020 with the establishment of an ECOWAS Central Bank and the introduction of the common currency. Prior to that time, the WAMZ monetary union would be launched ”on or before” 2015 with the establishment of its Central Bank and the introduction of its common currency. The WAMZ member countries that initiated the monetary union in 2000 are Gambia, Ghana, Guinea, Nigeria and Sierra Leone, following the Accra Declaration and the Bamako Accord in 2000.

The WAMZ will be following in a similar direction as the European’s Economic and Monetary Union, EMU, where at least 17 countries use the same currency and coins to do business in Eurozone states. The Eurozone began full operation in January 2002.

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