OF late, the idea of a single or common cur-rency for the Economic Community for West African States (ECOWAS) has returned to the front burner.

Proponents have argued that to actually achieve economic integration, the sub-region must be united under a common ECOWAS single currency.

The agitation further received a boost following the recent directive by the ECOWAS Chairman, President Goodluck Jonathan that member states should do all it takes to ensure a speedy take-off.
Experts have been examining the relevance to the Nigerian economy since it is the prime mover.

Background
The journey to monetary union started on April 20, 2000, in Accra, Ghana. The leaders of six West African countries declared their intention to proceed to monetary union among the non-CFA franc countries of the region by January 2003, as a first step toward a wider monetary union including all the ECOWAS countries in 2004.

The six countries committed themselves to reducing central bank financing of budget deficits to 10 per cent of the previous year’s government revenue; reducing budget deficits to four per cent of Gross Domestic Product by 2003; creating a Convergence Council to help coordinate macro-economic policies; and setting up a common central bank. Their declaration states that: “Member States recognise the need for strong political commitment and undertake to pursue all such national policies as would facilitate the regional monetary integration process.”

Under the arrangement, the common ECOWAS single currency will be initially introduced in the member countries of the West African Monetary Zone (WAMZ). These countries include Ghana, Nigeria, Sierra Leone, Gambia, Guinea and Liberia and later integrate with the French- speaking ECOWAS member states which currently have CFA as their ECOWAS single currency.

The launching of WAMZ will complement that of the West African Economic and Monetary Union (UEMOA), which groups eight West African states that share a common currency, the CFA Franc. UEMOA, created in 1994, has as members Benin, Burkina Faso, Cote d’Ivoire, Mali, Niger, Senegal, Togo and Guinea-Bissau. Two ECOWAS member - countries , Liberia and Cape Verde, are currently not members of either monetary union.

The body has set 2015 as the date for take-off after several postponements.

Criteria
To achieve the ultimate objective of ECOWAS single currency, member countries are required to implement a number of measures including: Adoption of a market based exchange rate system, micro-economic convergence, removal of trade barriers, the factor of statistical harmonisation, putting in place a payment system infrastructure as well as other facilities that would promote the conduct of monetary policy within the zone.

Analysts believe that for the ECOWAS single currency to be credible and stable, it must be guided by solid, predictable and sustained economic performance and achievements of certain fiscal, monetary policy convergence by the countries, which are circulating the currency.

Experts’ opinions
Experts are sharply divided on the relevance and importance of the single currency to the economy. While some opined that Nigeria’s weak economy cannot support the single currency, others believe the best time to establish it is now.

An Economist and Chief Executive, H.J Trust and Investment Limited, Mr. Harrison Owoh, said it is not enough for Nigeria to champion the single currency without a base.

According to him, the Nigeria currency, the naira, will bear the full brunt because it will be the central clearing system, stressing that the common currency which would be tied to naira will not be able respond to the economic dynamics.

“The naira is being projected to be the peg of the common currency. This implies that the fluctuation will impact negatively on the ECOWAS market,” he said.

He pointed out that all members of ECOWAS must work to achieve a single inflation rate, pointing out that a situation where Nigeria has the lowest inflation rate in the sub region was not a good pedestal for the new currency.

The respected Economist, who is also a Bureau De Change (BDC) operator, noted that unless all the variables are put in place, the common currency would go the way of ECOWAS travellers cheque, which could not survive for a year.

In his contributions, a financial analyst, Mr. Boason Omofaye, acknowledged the planned introduction of a common currency for the sub-region just like in the Euro for Euro-zone but submitted that the fundamentals are based on wrong footing.

According to Omofaye, none of the countries that currently constitute WAMZ has any robust economy that would support a common currency in the sub region.

In particular, he said Nigeria was not yet ready for ECOWAS single currency, stating that there was no way a consumption economy like that of Nigeria can be the peg for a sub regional currency.

“It is absolutely dangerous to allow the common currency to depend on the Nigerian economy, which is basically consumptive. Such currency should be based on industrialised economy like the Euro zone which chose Germany which has strong economy and currency as the benchmark,” he said.

He noted that the naira has no convertibility status with other global currencies like the CFA to French Franc, stating that it would face credibility test in international arena.

An investor, Mr. Boniface Okezie, however, said that a common currency was long over-due, stating that it would help reduce the pressure on naira.

He noted that it would boost economic activities in the sub region, adding that like the ECOWAS passport, a common currency would facilitate mobility of goods and services across the sub-region.

The shareholder activist was optimistic that Nigeria, the prime mover would be the greatest beneficiary, adding that all the bottlenecks associated with converting the currency would have been eliminated.

He maintained that the common currency would be the antidote to the devaluation pills of the International Monetary Fund (IMF), stressing that the central bank governors in the sub region would be able to focus more on monetary policies.

Support from outside
The International Monetary Fund (IMF), the European Union (EU), the Economic Community of Africa, the European Central Bank and the Bank of England are backing the proposal for the West African common currency.

According to IMF, ECOWAS members’ adoption of ECOWAS single currency would only be achieved when appropriate economic measures were put in place. The Fund report said the achievement of the common currency project would require a high degree of macroeconomic convergence, institutional development and political will.

It said fulfilling these conditions is a prerequisite if the foundation for a monetary union is to be strong, stating that opening of the economies of member states fully to both intra-regional and global trade was critical to the process of preparing for monetary union.

According to the report, some of the measures include integrated banking systems, harmonisation of securities listing requirements and unified payment system.

Nigeria’s take
There is no gainsaying the fact that Nigeria is providing the necessary leadership for the process.

According to the Director- General of the West African Monetary Institute (WAMI), Dr Temitope Oshikoya, Nigeria is bringing a lot to the table, stating that 60 percent of the budget of the West African Monetary Zone is covered by Nigeria.

He noted that other countries, especially the smaller countries are economically integrated with Nigeria; the implication is that they have a bigger market for their products.

“Take some countries like The Gambia and Sierra Leone, if you have someone manufacturing something in The Gambia, that country is just about 1.5million people, if that manufacturer can sell to the Nigerian market which is about 150 million people you can see that he has a huge market,”he said.

Constraints
There are several constraints in the quest to having ECOWAS single currency in the sub-region. First of all, there are major differences among the West African economies. In particular, Nigeria, a major oil exporter, faces a very different pattern of terms of trade shocks than the other economies of the region. Moreover, existing internal trade among the region’s countries is quite low, although there is undoubtedly considerable informal trade that is not recorded.

Others are political problems and other economic priorities in several of the region’s countries.

The second stage, involving the merger of the two currency unions, raises some of the same issues. It also raises additional issues, such as whether the French Treasury’s guarantee of convertibility of the CFA franc to the euro, at a fixed parity, would continue.

In considering the possible net economic benefits of monetary union, similarity of production structures, factor mobility, flexibility of wages and prices, and symmetry of shocks hitting the economies all enhance the attractiveness of such a union. In fact, there are major differences among the West African economies. In particular, Nigeria, a major oil exporter, faces a very different pattern of terms of trade shocks than the other economies of the region. Moreover, existing internal trade among the region’s countries is quite low, although there is undoubtedly considerable informal trade that is not recorded.

What is your view on this ECOWAS single currency ?.