Eco Currency: Can a West African Currency Union Work?

Eco Currency: Can a West African Currency Union Work?

Abdulkabeer Tijani

As part of the structural reform to enhance development in west africa, the ecowas body which is a sub-regional organization of west african state has planned on launching a single currency for west african countries. This decision which was agreed upon by fifteen countries in the region has been set to be launched in January 2020 even has expert has been divided on the possible gains this single currency would have on the region’s economy.

According to various reports, Negotiations for the currency have been on for over 15 years before it was formally adopted but due to lack of commitment and the inability of member countries to meet the set criteria the project has suffered setback. However,  even has the West African Monetary Zone (WAMZ) is keen on launching this framework in 2020 only Ghana has been able to meet the primary criteria. Furthermore, The Economic Community of West African States (ECOWAS) has, however, said that the rollout of the currency will follow a gradual process.

Now being a resident in of the countries in this region, it’s important that you understand this framework because its going to re-shape west africa economy when it finally launches.

Here are important things to know about Eco:

Launch date

The Eco was first planned to be introduced in 2003, but this was postponed several times, to 2005, 2010 and 2014. At a meeting of the Convergence Council of Ministers and Governors of West Africa on 25 May 2009, the start of the currency was rescheduled to 2015 due to the international economic crisis . The December 2009 meeting also established a plan to begin work to merge the Eco with the CFA franc immediately upon the launch of the Eco; this was planned to be achieved by 2020.

With the adoption of the Eco next year, French speaking West African countries will ditch the CFA Franc, known as “Colonies Francaises d’Afrique,” which was established in 1945 and pegged to the Euro since 1999.

Symbol

The official symbol for the Eco will be ‘Ec’. According to reports, the Eco notes will feature great African legends and showcase features of West Africa. The official bank for the sub-region’s currency will be known as the Central Bank of West Africa (CBWA).

Currency

There is no official value for the Eco currency yet.

Besides, For the common currency to be implemented, ten convergence criteria set out by the West African Monetary Institute(WAMI) must be met. These criteria are divided into four primary and six secondary criteria.

The four primary criteria to be achieved by each member country 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

Gross external reserves that can give import cover for a minimum of three months.

The six secondary criteria to be achieved by each member country are:

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.

[Culled from Wikipedia]

 

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