Here's why ECOWAS may not have a single currency by 2020

The United Nations Economic Commission for Africa said the attainment of all macroeconomic criteria by the ECOWAS states maybe unattainable before the 2020 deadline for the commencement of the region’s single currency agreement.

Amadou Diouf, an Economist from ECA West Africa, revealed this on Wednesday, June 27, 2018, in Cotonou, the economic centre of Benin, in a presentation at the on-going 21st Session of the Intergovernmental Committee of Experts for West Africa.

The Subregional Office for West Africa, based in Niamey, covers the 15 member countries of the Economic Community of West African States (ECOWAS): Benin, Burkina Faso, Cabo Verde, Cote d’Ivoire, the Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo.

Experts from these member States form the Intergovernmental Committee of Experts of West Africa and this year's session is themed: “Regional Integration in West Africa: Challenges and Prospects”.

Diouf said from the Commission’s findings, many of the countries were yet to meet the macroeconomic convergence criteria for a single currency set up by the ECOWAS and the West African Monetary Agency (WAMA).

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ECOWAS Single Currency

According to the report, the goal is to create a common currency for West Africa. For the currency to be implemented, ten convergence criteria was set out by WAMA.

Proposed criteria for meeting single currency policy by African nations

1. Single-digit inflation rate at the end of each fiscal year and deficit of not more than 3% of the GDP.

2. Central bank deficit-financing of not more than 10% of the previous year’s tax revenues

3. Gross external reserves that could cover a country’s import bill for a minimum of three months

4. The other six secondary criteria which had to be achieved by each member country are:

5. Prohibition of new domestic default payments and liquidation of existing ones

6. Tax revenue should be equal to or greater than 20% of the GDP.

7. Wage bill to tax revenue should be equal to or less than 35%

8. Public investment in tax revenue equal to or greater than 20%

9. Stable real exchange rate

10. Positive real interest rate

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Diouf said: “Less than two years from the attainment of the targeted deadline for the single currency, the prerequisite conditions to achieve the goals, notably the macroeconomic convergence criteria have only been partially achieved.

“Ghana, Niger and Nigeria have been put in charge to advocate for this monetary agenda.

“An updated roadmap was adopted in Ghana at the meeting of the presidential task force.

“It is important that West African experts be informed of the new roadmap and examine the potential implications of the ECOWAS.”

Is Nigeria ready?

Nigeria is not yet ready for a single African currency regime after the Africa's largest economy emerged from its worst economic recession in 20 years last year. The economy is projected to grow by 3.5% in 2018.

The country's currency is still on multiple forex rates, inflation still above double digits and the interest rate is currently at a 10-year high.

On the African Continental Free Trade Area on West Africa, the Nigerian government said it is currently consulting before appending its signature on the agreement.

Godwin Emefiele, Governor of the Central Bank of Nigeria and President Muhammadu Buhari had at different forums cautioned African nations against a hasty move to introduce a single currency for West Africa. They premised their arguments on diverse and uncertain macroeconomic fundamentals of many countries.

Nigerian government believed that ECOWAS heads of government have not properly analysed a comprehensive picture of the state of preparedness of individual countries for monetary integration by 2020.

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