Rage over Eco currency
Six countries of the Economic Community of West African States (ECOWAS) including Nigeria, Sierra Leone, Ghana, Liberia and Gambia, who are all English-speaking, as well as Guinea, a francophone country, have rejected the eco currency adopted by eight mostly francophone countries for good reasons, fuelling fears that the implementation may be stalled, report Ibrahim Apekhade Yusuf and Charles Okonji
The need for a common currency for the African continent has been on the front burner of public discourse. However, the bone of contention has always been the issue of modalities. The issues have not remained unresolved and still been hotly debated.
This is so true of the eco common currency already being implemented by some countries with the Economic Community of West African States (ECOWAS), by mostly francophone countries, who have since adopted eco as their the currency through their union, West African Economic and Monetary Union (WAEMU).
The WAEMU had in December announced a unilateral decision to rename the CFA Franc as Eco by 2020.
President of WAEMU and Ivory Coast, Alassane Ouattara and French President Emmanuel Macron said that the CFA franc would be renamed and undergo several reforms.
The Union comprises seven former French colonies – Benin, Burkina Faso, Ivory Coast, Mali, Niger, Senegal, Togo as well as Guinea-Bissau (a former Portuguese colony), all of which still use the CFA franc. The currency, which has long been denounced as a colonial relic, was first introduced by France in 1945.
The agreement between WAEMU and France scraps the requirement for the former’s members to keep 50 percent of their foreign reserves with the French Treasury. Instead of depositing their reserves in France, WAEMU nations will place them with the Central Bank of West African States (BCEAO). The reforms would also see French representatives excluded from any decision-making and/or management capacity regarding the eight countries.
But the agreement maintains that the Eco, similar to the CFA franc, is pegged at a fixed exchange rate to the euro while the Bank of France will continue to guarantee the new currency’s convertibility – the ease with which it can be converted into gold or another currency.
Opposition by other members of the Economic Community of West African States (ECOWAS), mostly consisting of the five Anglophone countries – Nigeria, Gambia, Ghana, Liberia, and Sierra Leone – along with Guinea, is based on the fact that the Eco was originally agreed in June 2019 to be adopted as a collective regional currency, not just a replacement for the CFA franc.
The six countries reached their decision at a council meeting of finance ministers and central bank governors that held in Abuja.
At the end of the meeting, delegates recommended that an extraordinary general meeting of ECOWAS heads of state and governments in the West African Monetary Zone be convened to discuss the matter.
“The meeting notes with concern, the declaration by the chairman of the authority of the heads of state and government of the West African Economic and Monetary Union on December 21, 2019, to unilaterally rename the CFA Franc as Eco by 2020,” the communique read.
“WAMZ convergence council wishes to emphasise that this action (is) not in line with the decision of the authority of heads of state and government of ECOWAS for the adoption of the Eco as the name of an independent ECOWAS single currency.
In July, ECOWAS agreed that ‘eco’, the proposed single currency for the zone, will be launched in January 2020.
They also agreed that a flexible currency regime would be adopted.
The President of the Commission of the Economic Community of West African States (ECOWAS) H.E Jean Claude Kassi Brou has restated the commitment of the Commission to the single currency project of the regional community.
President Brou also reaffirmed ECOWAS Commission’s determination to strengthen cooperation with all Member States’ Central Banks and Regional Institutions in order to meet the goals of the project.
Monetary integration in ECOWAS according to President Brou, is one of the main objectives of the regional integration programme prompting the regional leaders to decide on 2020 as the year of the launching of the Monetary Union.
However, it was noted that despite the strides, much work need to be done to achieve the stated objective of the project- a strong monetary union, which can serve the economic and social development of the region.
A cross section of delegates_
Stressing that a closer look should be given to ways of accelerating the implementation of the Roadmap of the single currency programme by removing all difficulties, president Brou added: “We need to continue to work collectively to deal in an adequate manner with those remaining challenges”.
In her address, the Minister of Finance of Nigeria Hon. Mrs. Zainab Shamsuna Ahmed harped on the importance of the ministerial meeting noting that the region is on crossroads over the single currency programme.
Calling for open, frank discussions by delegates, she reiterated that the lessons learned and recommendations from the meeting will have a profound impact on the economic development of the region. In this wise, the Nigerian Minister stressed the need for delegates to come up with a “befitting name” for the single currency, as well as a suitable location of its Central Bank taking into consideration the terms of reference of the project.
Change from CFA to ECO
According to the Director General of the Lagos Chamber of Commerce (LCCI), Dr. Muda Yusuf, “The change by the Francophone West African countries from the CFA to ECO has no significant implication for the Nigerian economy. However, the manner of the adoption of the ECO by the francophone countries raises concern around the mutual confidence levels between the Anglophone and Francophone countries in the region.”
Dr. Yusuf pointed out that the agreement by the ECOWAS countries was that the ECO will be the name for the common currency to be adopted by the all ECOWAS countries as soon as necessary conditions are met, but the Francophone countries curiously went ahead to adopt the name apparently without consulting the Anglophone counterparts in the region.
He said; “This has surely created a confidence problem between the two divides. Currency issues are not the biggest issues in the integration process in ECOWAS. The bigger issues are around the nontariff barriers to trade. These include complex and corrupt customs procedures, multiplicity of agencies and checkpoints along the borders, import bans, forex regulations, quality requirements, excessive documentation and many more.
“The experience of investors involved in the cross-border trade in the region has been awful. There is also the challenge of weak compliance with the ECOWAS protocols especially around the ECOWAS Trade liberalisation scheme [ETLS]. Connectivity between countries in the sub region is also a major problem. Over 80 percent of trade in the sub-region is done by road which creates a great deal of transit problems for movement of goods in the region. There is no rail connectivity within the region. There is weak link by sea because of the volume of cargo destined for the sub region and the economics shipments to the sub region.
“These are the bigger constraints to economic integration which the Heads of States of ECOWAS need to address. It is important to get priorities right as far as economic integration issues are concerned.”
Reasons for parallel implementation
The Francophone countries felt their Anglophone counterparts were slowing down the pace of implementation of the monetary union. The fact is that the Francophone countries have been in a monetary union for over 20 years. The deadline for the adoption of a common currency has been shifted several times. The last date agreed was for 2020. Perhaps they want to set the pace for the Anglophone countries to follow. But I believe that the hurried adoption of the eco by the francophone countries was not in good faith.
Contrarily, the Chairman of Apapa Branch of Manufacturers Association of Nigeria (MAN), Engr. Frank Onyebu, expressed that there is nothing wrong in its implementation.
According to him, the concept of a common currency is one of the original ideas of the founding fathers of ECOWAS. Eco as a nomenclature was conceived as the future currency for ECOWAS.
However, the current Eco is being driven by the Francophone countries, who agreed to abandon the CFA Franc in favour of Eco with apparent support of France, the puppeteer of CFA Franc.
“So I see a lot of power—play coming up between the Francophone and Anglophone countries. The following questions arise: Who is going to be in charge? Who will be pulling the strings? How willing is France to detach itself from the affairs of its former colonies?
“Besides, some bad blood appears to have developed between Ghana and Nigeria. Ghana, as I understand, has decided to embrace the scheme while Nigeria wants to study the new arrangement in more detail before making up its mind.
“This, I think, is the right thing to do. Going into a scheme like this is not something you go without considering all the factors at play. What do you do about differing inflation, interest rates and other indices within participating countries? How do you tackle political structures?
“Personally, I would support the scheme it is properly structured. A lot of work needs to be done; lots and lots of consultations. The question is, are we (ECOWAS members) prepared to do the needful? Do we have the political will to follow it through?” he queried.
Source: The Nation