Finance ministers from the 15 member countries of the Economic Community of West African States (ECOWAS) have given the greenlight to the historic creation of a single currency for West Africa in 2020.
This was confirmed on Tuesday after a two-day meeting in Abidjan where Ivorian Finance Minister Adama Kone said a roadmap has been established for the rollout of the currency and it would be reviewed by heads of state at the end of June, reports Bloomberg.
The finance ministers were joined by central bank governors to discuss technical issues arising from the currency creation including the exchange-rate regime and monetary-policy framework.
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It has been two decades since the idea of a single West African currency was hatched, however, issues including the lack of needed legal framework and achieving a single digit inflation of 5% or less have delayed the implementation process.
West Africa is divided by French and English-speaking countries with individual currencies that have varying degrees of value. The Francophone countries have shared the CFA franc since the colonial times which ties them to France.
ECO is the proposed name for the common currency that the West African Monetary Zone (WAMZ) plans to introduce. The aim is to merge ECO with West African CFA Franc and then ultimately create the common currency.
However, the four primary convergence criteria needed from each member state for the implementation of the single currency are; 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 and gross external reserves that can give import cover for a minimum of three months.
West African heads of state made a commitment in February 2018 to meet the criteria for the implementation of the single currency which would remove trade and monetary barriers and ultimately improve the economies of West African states.
“It is meant to encourage production of goods and services within the region. It is, thus, incumbent on us to strengthen the productive base of our economies, and to improve agricultural productivity and industrial production,” said Ghana’s president, Nana Akufo-Addo, at the fifth meeting of the Presidential Task Force on the ECOWAS single currency programme in Accra last year.
“With a population of some 350 million, which is expected to increase to 500 million in the next 20 years, and with a total GDP of some US$600 billion, there is a viable market ready to absorb the goods, which will be produced by our industries,” he assured.
As the African Union is preparing to kick start the African Continental Free Trade Area (AfCFTA) Agreement, West African states would be major beneficiaries with their single currency in the single largest market in the world.
The AfCFTA is expected to bring together the 1.2 billion African population with a combined gross domestic product (GDP) of more than $2.5 trillion to remove tariffs on 90 per cent of goods, with 10 percent of “sensitive items” to be phased in later.