Dr Bawumia whips up interest in 20yrs ECOWAS single currency

Vice-President, Dr Mahamudu Bawumia, has appealed to Member States of the West African Monetary Zone (WAMZ) to double their efforts towards meeting the macroeconomic convergence criteria for a single currency by January 2027.

The call follows failure by the Member States of WAMZ to meet all the four convergence criteria for a monetary union as of June 2023.

Four primary convergence criteria that must be met by each member country before the eco could be implemented are a single-digit inflation rate at the end of each year, a fiscal deficit of no more than 4% of Gross Domestic Products (GDP), a Central-bank deficit-financing of not 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.

An assessment of regional economies for 2022 showed that no Member State satisfied the four primary convergence criteria, while the number of Member States that met at least three primary criteria dropped to four.

Similarly, no Member State is expected to meet all the four primary criteria in 2023.

ECO launch postponed 4 times

Since its conception in 2003, leaders of the 15-member Economic Community of West African States (ECOWAS) have postponed the launch of the single currency at least four times namely in 2005, 2010, 2014, and 2020/2021.

2027 is new deadline

A new road map and a new convergence pact that covers the period between 2022-2026, and 2027 being the launch of the Eco has been tabled.

However, the concern is whether the 2026 deadline for achieving convergence is still realistic in the face of the disruptive effects of the repeated shocks on the region.

In 2022, only two Member States, Guinea and Liberia, met the budget deficit criterion.

However, performance on the average annual inflation criterion sharply declined, with only Benin and Niger meeting the target.

The central bank financing criterion also saw a deterioration in 2022, with four Member States missing the target.

Lastly, while performance on the gross external reserves criterion weakened slightly in 2022, 14 Member States still complied, showcasing the region’s resilience.

No member States met all four primary convergence criteria.

Four Member States (Benin, Niger, Guinea and Liberia) complied with at least three Primary Convergence Criteria.

There is a clear need for enhanced strategies and reforms to ensure all Member States align with our shared goals. 

The Eco is the proposed name for the common currency that the West African Monetary Zone plans to introduce.

After its introduction, the goal is to merge the new currency with the West African CFA franc at a later date.

Seven currencies are currently in use in West Africa’s 15 countries, with eight mostly French- speaking nations using CFA francs.

Vice-President Dr Bawumia made the call while addressing participants at the 2023 Mid-Year  Statutory Meeting of West Africa Monetary Agency (WAMA), the West Africa Institute for Financial and Economic Management (WAIFEM) and the West Africa Monetary Institute (WAMI) in Accra.

The meeting aimed at reviewing the macroeconomic development and convergence reports from Member States of WAMZ and evaluate progress made towards meeting the primary and secondary criteria required for a single currency.

It brought together finance ministers and governors of the central banks of WAMZ member states, including Ghana, Nigeria, Liberia, The Gambia and Sierra Leone.

Vice-President Dr Bawumia said the recent geo-economic fragmentation globally had made it imperative for inclusive monetary integration within the sub-region.

“It is important for the Member States of the WAMZ to take ownership of the convergence programme by mainstreaming it into the national macroeconomic frameworks and undertake meaningful reforms to achieving the convergence criteria on a sustained basis, otherwise the vicious cycle of endless postponements will continue to hunt us,” Dr Bawumia stated.

“We, therefore, must double our efforts in ensuring macroeconomic convergence and stability which are the necessary conditions for the take-off of a monetary union.

“As we engage in development activities in our various countries, we should not lose sight of the fact that macroeconomic stability is vital for monetary union to thrive,” he added.

Dr Bawumia underscored the need for a balance between economic development and macroeconomic stability.

He noted that despite the daunting challenges involved in meeting the criteria, there had been significant milestones chalked towards the implementation of the activities of the ECOWAS single currency roadmap over the years.

“I understand that the name of the proposed single currency has been determined and is called the eco.

“A federal model structure has been adopted for the common central bank, the name of the common central bank has been determined as the Central Bank of West Africa, a flexible exchange rate regime adopted, and inflation targeting framework chosen,” he added.

However, he observed that, more than 50% of the activities of the roadmap are outstanding, including statistical harmonisation, macroeconomic convergence, capital account liberalisation, among others.

He lauded the African Development Bank’s financial support worth $9 million to WAMI towards the preparation of Unique Bank Identity (UBI) Project.

The project is intended to ensure bank customer identification and secured digital banking transactions.

Model legislative instruments have been drafted for adoption by the member states to meet the regulatory needs of the emerging financial technological innovations, in a globally interconnected financial ecosystem.

The Vice-President said significant strides had also been made in debt and capital market integration as well as insurance integration in the WAMZ.

Government of Ghana, he said, was committed to restoring macroeconomic stability that formed the basis of sustainable economic growth and development.

“We are leaving no stone unturned under our Post Covid-19 Programme for Economic Growth (PC-PEG) aimed at restoring macroeconomic stability and debt sustainability, building resilience through the implementation of wide-ranging and strong structural reforms programming and laying the foundation for stronger a more inclusive growth, while also protecting the poor and the vulnerable”.

Over the medium term, he underscored government’s resolve to work hard to rejuvenate the economy and improve on its performance on the convergence criteria.

Vice-President Bawumia, therefore, commended the efforts of WAMI and all the stakeholders in ensuring that the single-currency project remained a priority and on course.

Finance minister, Mr Ken Ofori-Atta was chosen as the Chair of Convergence Council of Ministers and Governors of the Central Banks of the West African Monetary Zone.

Earlier, Governor of the Bank of Ghana, Dr Ernest Addison called for concerted efforts to help improve the macroeconomic environment and place the West Africa sub-region on a stronger convergence path for a viable monetary union.

Speaking at the opening session of the Joint Ordinary Meeting of the Economic and Monetary Affairs Committee and The Operations and Administration Committee of WAMA, Dr Addison said the performance was worrying but not surprising given the challenges the region has faced over the past three years.

“Now the concern is whether the 2026 deadline for achieving convergence is still realistic in the face of the disruptive effects of the repeated shocks on the region. This, perhaps, calls for a readiness assessment for the launch of the ECO in 2027 as move along,” he said.

“With the new roadmap, majority of Member States must meet all the Primary Convergence Criteria on a sustainable basis by 31st December 2026. This implies that the period 2024 to 2026 is critical if we should make any meaningful progress with the new Roadmap,” Dr Addison said in a speech read on his behalf by Dr Phillip Abraidoo-Otoo, Director of Research of the Bank of Ghana. 

Dr Addison said despite the challenges some progress had been made in the implementation of the roadmap.

The Director-General of the West Africa Monetary Agency Momodou Bamba Saho said the roadmap for the launch of the ECO required member states to consistently meet all the four primary convergence criteria by 2026.

Other institutions that participated in the Mid-Year meetings include the West African Monetary Agency (WAMA), the West Africa Institute for Financial and Economic Management (WAIFEM), and the West Africa Monetary Institute (WAMI). 

The meetings held included the 7th Meeting of the Audit Committee of WAMA on September 5, 2023; the 48th Technical Committee Meeting of WAIFEM on September 6, 2023; and the 43rd Joint Ordinary Meeting of the Economic and Monetary Affairs Committee and the Operations and Administrative Committee, WAMA on September 7, to September 9, 2023.

Others were the 46th Meeting of the College of Supervisors of the WAMZ (CSWAMZ) from September 7 to September 11, 2023; 8th Meeting of College of Supervisors of Non-Bank Financial Institutions (CSNBFI) of the WAMZ on September 7 to September 11, 2023; 53rd Meeting of the Technical Committee of WAMZ from September 11 to September 12, 2023; and the 47th Meeting of the Committee of Governors of Central Banks of WAMZ on September 14, 2023.

The rest were the 45th Meeting of the Board of Governors, WAIFEM on September 14, 2023; the 62nd Ordinary Meeting of the Committee of Governors of Central Banks of ECOWAS Member States, WAMA on September 14, and the 50th Meeting of the Convergence Council of Ministers and Governors of Central Banks of the WAMZ    on September 15.

The West African Monetary Institutions pledge commitment to fostering economic cooperation and integration within the region, and these meetings play a pivotal role in advancing this mission.

The WAMZ is composed of six member states that include The Gambia, Ghana, Guinea, Liberia, Nigeria, and Sierra Leone.

Its organizational structure includes the Authority of Heads of State and Government of the WAMZ, the Convergence Council, the Committee of Governors, and the Technical Committee. 

The meetings are hosted by Member States of the WAMA and WAMZ rotationally.

WAMA is an autonomous and specialized agency of ECOWAS. It is tasked with monitoring, coordinating, and implementing the ECOWAS Monetary Cooperation Programme (EMCP), which aims to establish a single currency for ECOWAS member states.

WAMA’s membership comprises eight central banks of ECOWAS member states, including the BCEAO, the Bank of Cabo Verde, the Central Bank of The Gambia, the Bank of Ghana, the Central Bank of the Republic of Guinea, the Central Bank of Liberia, the Central Bank of Nigeria, and the Bank of Sierra Leone.

WAIFEM is a sub-regional capacity-building organization. WAIFEM’s primary goal is to strengthen capacity in areas such as macroeconomic management, debt management, and financial.