West Africa targets 2020 as single currency date, but what’s the point?

A new date has been set for the launch of the single currency for the Economic union of west African states. The plan which has had it’s launch date shifted several times, was initiated by the Council of Ministers and Governors of Central Banks of the West African Monetary Zone (WAMZ), was designed to create a single currency (the Eco) and also unify the monetary efforts of member states.

The council had set 10 conveyance criteria, which had to be fulfilled for this dream to be actualized, however, as at 2011, only Ghana have been able to meet all the primary criteria in any single fiscal year, with Nigeria only entering this class in 2012.
 

These criteria include a single digit inflation, budget deficit with a GDP of not more than four per tent (excluding grants), Central Bank financing should not be more that 10 per cent of what the country earned as tax revenue and the reserves of the member countries should not be less than six moths of export cover, amongst others.

Mr. Abel Essien, the Director of Strategic Planning, ECOWAS Commission, on Monday announced that
 

The Economic Community of West African States (ECOWAS) has set a new 2020 deadline for the commencement of its single currency policy in the region.
 

“The 2020 vision seeks to create a borderless, peaceful, prosperous and cohesive region built on good governance. It will also give people the capacity to access and harness its enormous resources through the creation of opportunities for sustainable development and environmental preservation,” Essien said.
 

Essien said this at a meeting on Strategic Planning Framework for 2016 – 2020 in Calabar, Nigeria. The 2016-2020 vision was set up to ensure congruence of purpose and to ensure the effective mobilisation and utilisation of the region’s abundant resources and comparative advantage. It will also provide the general framework for advancing integration wok in the region and guiding national development planning process.’
 

Experts have been divided on the relevance and importance of the single currency to the economy. While some opined that Nigeria’s economy cannot support the single currency, others believe the best time to implement such a programme is now.
 

Head of ECOWAS National Unit, Ghana, Mr. Bonaventure Adjavor, believes that the currency will not be affected by the lack of a common language. “I do not see language as a barrier to single currency, the process to adopt the currency is ongoing and a new timetable has been set for 2020. He also said that the use of single currency would facilitate the movement of persons and communication in the West African sub region.
 

Advocates have argued that to actually achieve economic integration, the sub-region must be united under a single currency. A feat that has thus far eluded the European Union and it’s own regional currency, the Euro. Many have attributed the inconsistencies of the Euro as an inevitable consequence of imposing a single currency on a very heterogeneous group of countries.
 

The adverse economic consequences of the euro, which was introduced in 1999, include the sovereign debt crises in several European countries, the fragile condition of major European banks, high levels of unemployment across the Euro-zone, and the large trade deficits that now plague most Euro-zone countries.
 

Noting that the initial impetus that led to the European Monetary Union and the euro was political, not economic, little attention was given to how these very different countries (by size, debt and economic power) would integrate to have a single economic, monetary and fiscal goal. Even though the criteria was set for membership, as WAMZ has done, little thought was given to continuity.
 

The biggest drawback to such success, is that many smaller nations would have to yield some of their sovereignty to the more bigger nations. France and Germany dictated painful austerity measures in Greece and Italy as a condition of their financial help, knowing that these nations could really not go outside the zone without breaching the Euro-zone membership rules.
 

For the bigger countries, more pressure will mount whenever the smaller countries hit hard times, as the economic welfare of each member nation has it’s effect on the common currency. Paris and Berlin, as concerns Greece and Italy, clashed over the role of the European Central Bank (ECB) and over how the burden of financial assistance will be shared.
 

A single currency also means a fixed exchange rate within the monetary union and the same exchange rate relative to all other currencies, even when individual countries in the monetary union would benefit from changes in relative values. Economists have explained that the eco would lead to greater fluctuations in output and employment, a much slower adjustment to declines in aggregate demand, and persistent trade imbalances between ECOWAS and the rest of the world. ECOWAS only needs to look at the Euro-zone to see that indeed, all these negative outcomes have occurred in recent years.