The 2020 proposed take-off date for the commencement of a single currency regime for the West Africa sub-region may not be realised as many countries within the region had yet to meet the convergence criteria for the monetary union.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, who confirmed the development in Abuja said only Togo had met all the convergence criteria within the last two years for the monetary union.
She spoke on Friday at the opening session of a meeting of ECOWAS ministerial committee of ministers of finances and governors of Central Banks on the ECOWAS single currency programme.
The idea of the single currency for the West African region was first mooted almost 30 years ago in the hope of boosting cross border trade and economic development.
Leaders of the 15 member states of the ECOWAS had formally agreed to name the common currency the “Eco”.
The member countries that made up ECOWAS are Benin, Burkina Faso, Cape Verde, Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo.
There are three primary and three secondary criteria that a country must achieve to be included in the monetary union.
The three primary criteria are a budget deficit of not more than three per cent; average annual inflation of less than ten per cent with a long term goal of not more than five per cent; and a gross reserve that could finance at least three months of imports.
The three secondary convergence criteria that have been adopted by ECOWAS are public debt/Gross Domestic Product of not more than 70 per cent; central bank financing of budget deficit should not be more than ten per cent of previous year’s tax revenue; and nominal exchange rate variation of plus or minus 10%.
Ahmed said the single currency to be known as “Eco” would be based on a flexible exchange rate regime, coupled with a monetary policy framework that would be focused on inflation targeting.
She said with only Togo meeting the criteria in the last two years, it would be difficult to operationalize the single currency regime by next year with Togo alone.
The minister said the inability of other countries in the sub-region to achieve the criteria would make the operationalization of the “Eco” currency in 2020 problematic.
She said there was a need for member states to pursue appropriate policies and structural reforms that would enable them to meet the convergence criteria.
Zainab said “We need to address in an optimal way the challenges ahead of us. This meeting is important because we are at a crossroads. The recommendations we make will have significant implications on the monetary policies we undertake.”