Ahmed: Macroeconomic Constraints May Jeopardise ECOWAS Monetary Union Kickoff

Zainab Ahmed

James Emejo in Abuja

Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, yesterday said the 2020 implementation deadline set for the adoption of single currency by ECOWAS member states had been constrained by the continuing macroeconomic vulnerabilities in the respective economies.

She stated that till date, only Togo out of the 15 ECOWAS member countries had been able to fulfil all four convergence criteria required for a smooth transition by the target date.

Nevertheless, she said the regional economies were improving despite the global slowdown, as they continued to record relative stability in oil production and prices and increasing investment in agriculture.

Speaking at the opening of a meeting of the ECOWAS ministerial committee of ministers of finance and governors of central banks on the single currency initiative, Ahmed noted that Nigeria had nonetheless continued to record progress towards meeting the macroeconomic criteria, particular as it regards its debt levels.

The minister said the meeting was particularly important at a moment of great expectations from both domestic and international community, adding that the outcome would affect the development and survival of the respective member countries.

Specifically, the minister said Togo remained the only country that has met the convergence criteria within the last two years, a development which makes it difficult to operationalise the proposed currency union, which is already christened as ‘ECO’.

She further admitted that macroeconomic stability remained uncertain in the region.

She said there had been a failure by most ECOWAS countries to implement critical roadmap activities to achieving the target.

Nevertheless, she said some significant progress had been recorded by member states in the areas of inflation targeting, flexible exchange rate, the establishment of the ECOWAS central bank as well as the adopted ECO as the single currency.

Ahmed further enjoined the gathering to be steadfast towards meeting all convergence criteria for a smooth monetary union.

Noting that Nigeria currently supported the establishment of ECOWAS central bank in no distant future, she tasked the meeting to work out a befitting name and location for the institution which is expected to facilitate regional trade among others.

Ahmed also seized the opportunity to reassure the ECOWAS member countries that the country remained committed to trade liberalisation. Commenting with respect to the present closure of its land borders to tame dumping and smuggling, she said if left unchecked, the development tended to threaten the country’s ambition to diversify its economy.

She however assured that efforts were ongoing to resolve the border impasse following a recent tripartite meeting with stakeholders.

However, the concept of a monetary union, conceived nearly 30 years ago aimed to facilitate cross border trade and economic development of the member states.

Essentially, each country is expected to maintain 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 as well as a gross reserve that supports at least three months of imports- as a primary criteria.

Also, the respective economies are expected to further maintain a public debt/Gross Domestic Product (GDP) of not more than 70 per cent; central bank financing of the budget deficit should not be more than 10 per cent of previous year’s tax revenue as well as nominal exchange rate variation of plus or minus 10 per cent.

The ECOWAS member countries include Benin, Guinea-Bissau,, Senegal, Sierra Leone, Verde, Gambia, Ghana, Guinea, Togo, Burkina Faso, Cape, Ivory Coast, Liberia, Mali, Niger and Nigeria.

In August 2018, the West African Monetary Institute  (WAMI), had raised concerns that Barely 18 months to the projected 2020 implementation deadline, no member country of the West African Monetary Zone (WAMZ) including Nigeria, had met all convergence criteria towards the implementation of a single currency  for the sub-region.

Though the average performance of the zone indicated improvement in macro-economic convergence index as at December 2017, none of the member countries satisfied all four criteria including inflation and fiscal deficit criteria and gross external reserves requirement as well as central bank financing criteria.