It came as good news when the call for a single currency in West Africa was made by the West African Monetary Zone (WAMZ) of the Economy of West African States (ECOWAS) in December 2000. But sixteen years on, the dream for said currency is feared to be fading.
A WAMZ performance scorecard shows that as of 2012, no member state had met the criteria for currency convergence. Failing economic prospects and double inflation rates were most often blamed. This development caused the dream of the ECO currency to be abolished at the 45th ordinary session of ECOWAS held on July 10, 2014 in Accra, Ghana.
A new timeline has been set for 2020, with each member state expected to achieve a set of criteria in order to move the dream of a single currency ahead. Bank of Ghana’s first deputy governor Millison Narh has called for all member states to stick to the goals of WAMZ and strictly ensure that macro-economic turnouts do not backslide. The criteria are:
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- A single-digit inflation rate at the end of each year.
- A fiscal deficit of no more than 4% of the GDP
- A central bank deficit-financing of no more than 10% of the previous year’s tax revenues
- Gross external reserves that can give import cover for a minimum of three months.
- Prohibition of new domestic default payments and liquidation of existing ones.
- Tax revenue should be equal to or greater than 20 percent of the GDP.
- Wage bill to tax revenue equal to or less than 35 percent.
- Public investment to tax revenue equal to or greater than 20 percent.
- A stable real exchange rate.
- A positive real interest rate.
One need not be a rocket scientist to see that all West African states have fallen short of these benchmarks. In Benin for instance, economic growth slipped from 5.6% in 2013 to 5.5% in 2014. Burkina Faso also followed the same slow rate of economic development as its growth rate of 6.6% in 2013 dwindled to 5.5% in 2015, due to pockets of political violence and the deadly Ebola outbreak. West Africa’s largest economy, Nigeria, has had its economic performance fluctuate from 5.4% in 2013, to 6.3 in 2014, 5% in 2015 and up again to 6% in the early part of 2016.
Director-General of the West African Monetary Agency (WAMA) Professor Mohammed Ben Omar Ndiaye has revealed that the call for a one-unit currency can only be achieved if all West African economies are able to positively regulate their budget deficits. Strategies to achieve this include adjustment of trade barriers to include more private partnerships, fiscal discipline and reduction in government spending.
“We are urging the countries to do their best so that they can meet this criteria. We have to push very hard; a lot needs to be done and it’s challenging. It’s difficult achieving it, and difficult managing it even when we get there but we need to be committed and push ourselves to achieve it,” Ndiaye stated.
WAMA’s Chief Economist Dr. Christian Ahortor says the lack of political will is the main cause of the problem:
“Because the political will is not there that is why we don’t see them meeting this criteria. If I say those who want to be part of the monetary union, make sure your inflation is less than 10 per cent, and when you are planning your target is beyond the single digit inflation, how then can you meet it?”