Eco at a Cross-Roads: The Conspiracy Theory?

-By Benjamin Ime

On Thursday, January 23rd, Nigeria and six other English-speaking countries, including Ghana, The Gambia, Guinea, Liberia, Sierra-Leone and Cape Verde met to review the controversy trailing the adoption of Eco currency by the Franco-phone countries. Nigeria is yet to make its official position on the issue known.

There is no gainsaying the fact that the 2020 proposed take off date for the commencement of a single currency regime for the West African sub-region may not be realised as many countries within the region had yet to meet the convergence criteria within the last two years for the monetary union. The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, who confirmed the development in Abuja said only Togo had met all the convergence criteria. She spoke on Friday January 17th at the opening session of a meeting of ECOWAS Ministerial Committee of Ministers of Finance and governors of Central Bank on the ECOWAS single currency programme.

The idea of the single currency for the West African sub-region was first mooted about 30 years ago in the hope of boosting cross-border trade and economic development, and the 15-member states of the ECOWAS had formally agreed to name the common currency “Eco”.

The member-countries that make up ECOWAS are Benin Republic, Burkina Faso, Cape Verde, The Gambia, Ghana, Guinea Bissau, Ivory Coast, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo.

A country is supposed to achieve three primary and three secondary criteria to be included in the monetary union.

The three primary criteria are budget deficit of not more than three percent; average annual inflation rate of less than ten percent; and a gross reserve that could finance at least three months of imports.

While the three secondary convergence criteria that have been adopted by ECOWAS are public debt/Gross Domestic Product of not more than 70 per cent; Central Bank financing of budget deficit of not more than 10 per cent of the previous year’s tax revenue; and nominal exchange rate variations of plus or minus 10 per cent. Ahmed pointed out that the Eco single currency would be based on a flexible exchange regime, coupled with a monetary policy framework that would be focused on inflation-targeting, maintaining, however, that with only Togo meeting the criteria in the past two years, it would be difficult to operationalize the single currency regime. In other words, the Minister said the inability of other countries in the sub-region to achieve the criteria would make the operationalization of “Eco” currency in 2020 problematic, harping on the need for member-states to pursue appropriate policies and structural reforms that would enable them meet the convergence criteria, adding “we need to address in an optimal way the challenges ahead of us.”

This meeting is important to us because we are at a cross-roads. The recommendations we make will have significant implications on the monetary policies we undertake, she emphasized.

But in a quick reaction, a former Special Assistant (SA) on Political Matters to former President Olusegun Obasanjo, Dr. Gbolade Oshinowo, warned Nigeria against jumping into the fray with its toga of ‘Big Brother’ arguing that there is an urgent need to strengthen the value of the Naira to derive the expected benefits from the currency union.

His words: “Nigeria’s economy should be the primary concern of the Federal Government. It is only when the economy is buoyant that we can think of regional alliances. It is not advisable at this stage when our Naira is week and our economy is vulnerable. I don’t think Nigeria as a leader in the group is the one driving the initiative. I suspect that certain decisions had been taken by the Francophone bloc and only expected Nigeria to come along and I think it is very dangerous. It is something we must watch very carefully. Nigeria has to tread very carefully so that it doesn’t just rush into something that it would regret”, he told the Sunday Sun.

But a financial expert and Managing Director of Cowries Assets Management Ltd., Mr. Johnson Chukwu, dismissed the fears as unfounded, arguing that France was until the adoption of Eco currency a guarantor of CFA and therefore, will not be in a position to manipulate the single currency when it comes into full operation in the sub-region. “I wouldn’t see it from that perspective because African countries are going towards economic integration. There is no way France can manipulate Eco currency. She is only a guarantor and I doubt if it can continue to play that role when all West African countries join the currency. To manipulate a currency means you supply that currency beyond the market demand and you buy that currency to stabilize it. Granted that Francophone countries had their currency guaranteed by France and had a link to Euro. I don’t see why any country should adopt a conspiratorial approach to it. They have been in single currency for decades even before the advent of Euro. So, where is the conspiracy theory coming from?”

He explains: “the issue of Eco as common currency has been on for almost 30 years and the Francophone countries have always been using common currency apart from Guinea Conakry. I do not see how their adoption of Eco will amount to short-circuiting the system. It is for the English-speaking West African countries to come up swiftly and work towards economic integration of West African sub-region, the Francophone countries are far ahead of the Anglophone states in that respect.

The Economic Community of West African States also known as ECOWAS is a regional political and economic union of 15 countries established on May 28th, 1975 with the signing of the Treaty of Lagos, with its stated mission to promote economic integration across the region.

ECOWAS also serves as a peacekeeping force in the region, with member-states occasionally sending joint military forces – Economic Community of West African States Monitoring Group (ECOMOG) – to intervene in the bloc’s member – countries at times of political instability and unrest. In recent years, these included interventions in Liberia and Ivory Coast (2003), Guinea-Bissau (2012), Mali (2013) and The Gambia (2017).