Two decades after, Eco, a common currency for West Africa, is yet to see the light of day, the Chief Executive Officer, Standard Chartered Bank Nigeria Limited, Lamin Manjang, has said.
In 2020, the currency was billed for launch, but it was postponed because of the COVID-19 pandemic, and no new timetable had been announced, he said. He added that there were concerns about whether Eco would continue to be a viable proposition.
Manjang, who is also Cluster Chief Executive Officer, West Africa, wondered about the delays, despite the many advantages the currency offers to the 15 members of the Economic Community of West African States (ECOWAS) trading bloc.
“Removing trade and monetary barriers and meeting these targets across the region would have significant benefits for the countries involved. Meeting the convergence requirements would instill greater fiscal discipline in the region and provide a mechanism for unlocking improved transactional efficiencies and ensuring more predictable monetary policy and inflation management as well as reduced risk,” he said.
Manjang said having a common currency would remove trade and monetary barriers, boost economic activity and upliftment in the region of 385 million people. This, in turn, would be a catalyst for new investment.
But with no new date set for the launch, there are concerns about the project.
Manjang said of the 15 countries in the region, eight use the CFA Franc while others use various currencies, which are not easily convertible.
“Meeting the criteria for convergence in the region has proved to be a major challenge for big and small countries. The primary criteria include single-digit inflation at the end of each year; a fiscal deficit of no more than four per cent of Gross Domestic Product; central bank deficit financing of no more than 10 per cent of the previous year’s tax; and sufficient gross external reserves to give import cover for a minimum of three months,” he said.
Manjang said the six secondary criteria include tax revenue greater than 20 per cent of Gross Domestic Product (GDP), wage bill-to-tax equal to or less than 35 per cent, public investment-to-tax revenue equal to or greater than 20 per cent, a stable real exchange rate and a positive real interest rate.
The disruption caused by the pandemic has led some countries to look at new monetary strategies.
He said the two English-speaking heavyweights had shown little appetite for the Eco project. This is important, given their size, particularly Nigeria, which accounts for 65 per cent of the regional GDP and about half of the population.
“The economic giant fears losing its fiscal sovereignty and having to fall in line with regional policy. in addition, it is one of just two oil producers in the region, which it may need to employ monetary policy responses to terms of trade shocks that would not be favourable for other members of ECOWAS. The introduction of digital currencies by the central banks of Nigeria and Ghana have raised concerns that they are already leaving the Eco project behind,” he said.
The launch of the African Continental Free Trade Area last year has also led to efforts by key stakeholders to find ways to improve the ease of trading across borders in the absence of a common currency.