The idea for Eco as a single currency for the West African region was first put forward some 30 years ago.
The new currency, ECO to be launched in 2020 was formally adopted by the ECOWAS leaders in a meeting held on Abuja on Saturday. The expectation is that the single currency will boost trade and economic development in the region.
The 15-member group comprising of Benin, Burkina Faso, Cape Verde, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, The Gambia and Togo met to review progress on regional integration of member states. According to Adam Koné, the markets in the region are currently fragmented. He believes the integration will “strengthen the mechanisms of multilateral surveillance” and “improve savings”.
The “convergence criteria” has not been implemented among member nations as only Ghana has been able to meet all the four “primary criteria” in any single fiscal year. The union has demanded that member states improve macroeconomic convergence as the deadline for setting up a monetary union approaches. In addition, ECOWAS has likewise asked members to intensify efforts in identifying people who can;
- facilitate free movement and
- remove barriers across the trade bloc
It is expected that member states pursue appropriate policies and structural reforms capable of sustaining economic growth.
In as much as economists say they understand the rationale behind the currency plan, they are however are of the opinion that it is unrealistic and may be dangerous for the region’s economy. Nigeria dominates the economy of the region accounting for two-thirds of the region’s economic output. Also operating a multiple exchange regime and a managed float currency. Conversely, a number of other states have theirs pegged to the euro.
Eight of the fifteen countries currently use the CFA Franc. CFA Franc should merge with the Eco in a plan that has been active since 2009.
The political will is there among leaders of member nations, says ECOWAS chairman President Issoufou Mahamadou of Niger. However, the bloc, first needs to establish a monetary union as it attempts to expand regional integration.