The 2020 proposed date for the commencement of a single-currency regime for West Africa may not be realised as many countries within the region have yet to meet the criteria 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 at the opening session of a meeting of ECOWAS committee of ministers of finances and governors of central banks on the currency programme.
The idea of the single currency for the West African region was first mooted almost 30 years ago in the hope of boosting cross-border trade and economic development.
Leaders of the 15 member states of the ECOWAS had formally agreed to name the common currency “Eco”.
The member countries that made up ECOWAS are Benin, Burkina Faso, Cape Verde, Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo.
There are three primary and three secondary criteria that a country must achieve to be included in the monetary union.
The primary criteria are a budget deficit of not more than three per cent; average annual inflation of less than 10 per cent with a long-term goal of not more than five per cent; and gross reserves that could finance at least three months of imports.
The secondary convergence criteria adopted by ECOWAS are public debt/Gross Domestic Product of not more than 70 per cent; central bank financing of budget deficit should not be more than 10 per cent of previous year’s tax revenue; and nominal exchange rate variation of plus or minus 10 per cent.
Ahmed said the single currency would be based on a flexible exchange rate regime, with a monetary policy framework that would be focused on inflation.
She said with only Togo meeting the criteria in the last two years, it would be difficult to operationalise the single-currency regime by next year.
The minister said the inability of other countries in the sub-region to achieve the criteria would make the operationalisation of the “Eco” currency in 2020 problematic.
She said there was a need for member states to pursue appropriate policies and structural reforms that would enable them to meet the convergence criteria.
Zainab said, “We need to address in an optimal way the challenges ahead of us. This meeting is important because we are at a crossroads. The recommendations we make will have significant implications on the monetary policies we undertake.”
She said despite the vulnerability of the global economy, the ECOWAS sub-region was making progress in its growth trajectory.
The finance minister said that in the first half of this year, the economy of the ECOWAS sub-region recorded a growth rate of 3.1 per cent, adding that this was expected to hit 3.3 per cent by end of this year based on projections.
She said the increased economic performance was driven mainly by relative stability in commodities’ prices and increased investment in agriculture and services sector.
At the domestic front, she said that the Nigerian economy was recording improvement, adding that the Federal Government was implementing various reforms to enable the country to achieve its targets for the monetary union.
On the issue of border closure, she said Nigeria shut its land borders to neighbouring countries because of their failure to obey trade agreements.
She said while Nigeria attached great importance to trade liberalisation, countries must be able to respect global trade commitments.
She told members of the committee that the Federal Government decided to take the painful but proactive steps to check the smuggling threats, adding that if left unattended to, it would affect Nigeria’s competitiveness and that of the entire West African sub-region.
In his address of welcome, the President of the ECOWAS Commission, Jean-Claude Kasi, said that member countries had made significant progress in several areas to achieve the monetary convergence.
However, he said despite the progress made, there was still much work to be done.
He described the meeting of the ministers of finances and governors of central banks as critical considering that the region had just a few weeks to the proposed 2020 commencement date.