The 53rd Ordinary Session of the Authority of Heads of State and Government of Economic Community of West African States (ECOWAS) has ended in Lome, Togo, with no clear cut date for the commencement of the region’s proposed Single Currency, Eco, with the deadline year of 2020 fast approaching.
Originally intended to be launched in 2000, the idea of a single currency project by ECOWAS was first proposed in the same Lome, Togo, at the 1999 ECOWAS summit. However, the commencement of Eco has been postponed on multiple occasions and the newest target is 2020.
A single currency for the ECOWAS sub-region is the ultimate objective of the 15 member-states. However, eight francophone countries in ECOWAS already have a common currency, the Communite Financiere Africaine (African Financial Community), which is controlled by the French treasury, through which it is attached to the Euro zone, thereby making it convertible.
With a very strong Naira back then, Nigeria almost single handedly financed the establishment of ECOWAS in 1975. Then, the Naira exchanged rate was about 70 Kobo to a Dollar and it was expected that Naira would eventually replace CFA or better still, both might be used as the adopted currencies for trade in the sub-region. Alas, the Naira is now battling to regain its lost glory and currently trade at N357 to a Dollar. The Eco will initially be adopted by five countries: Nigeria, Ghana, Gambia, Sierra Leone, Liberia and Guinea while other member states are expected to join the monetary union later.
Nigeria is the giant of the sub region, boasting of the largest economy not only among ECOWAS members, but also on the continent. Since Nigeria constitutes more than 75% of West Africa’s GDP and boasts of a population of over 180 million; she would absolutely play a very key role in facilitating the process of achieving Eco for the sub-region.
However, the biggest challenge facing the realisation of the single currency is the reluctance of Nigeria to fully throw her weight behind the proposed monetary union. Within the last one year, Nigeria has twice cautioned against hasty moves to introduce the single currency for West Africa. At the Presidential Task Force on the ECOWAS single currency programme, held in Accra, Ghana in February 2018, Nigeria cautioned against hasty moves to introduce the Eco. President Buhari had earlier kicked against the fast-track moves to introduce the single currency, at the 4th meeting of the Presidential Task Force on the ECOWAS Currency Programme, in Niamey, last October. He cited the absence of right economic fundamentals and other important foundations to build on in the sub-region.
A common currency is the last stage of an economic integration which means there will be free flow of goods and services, labour and capital, within the sub-region. This means workers in Nigeria can easily migrate to other countries in the sub region, where there are labour shortages or high wages.
Also, the arrangement will enable Nigerian investors to have easier access to the economies of ECOWAS members, since they can freely move their capital to member states. Another huge advantage the Eco will give Nigeria is the fact that manufacturing companies in Nigerian will also have more access to the local markets in the sub-region.
Since trade barrier is expected to be very low, Nigeria can equally seize the opportunities and open up trade advantage for herself by expanding her export sector and importing cheaply from ECOWAS member states, without foreign exchange barriers.
If the monetary union turns out to be a deep economic integration in future, smaller member nations might become over reliant on big brother Nigeria, since she is by far the biggest economy in the sub-region. A good case study is Germany, the dominating economy in the Euro zone who is greatly feeling the burden of Euro leadership. By extension, Nigeria would also be strongly vulnerable to any economic shock from the monetary union, since her economy constitutes over 75% of the GDP of West Africa.
Moreover, Nigeria would be losing a large chunk of her monetary autonomy to a new regional central bank. Even, if the Central Bank of Nigeria (CBN) were to remain in existence, it would have a very limited role. This regional central bank will also be dictating monetary policies for the bloc, including setting interest rates and regulating the money supply in the sub-region, which might not be to Nigeria’s economic advantage.
Also, the introduction of Eco could mean Nigeria would no longer be able to print her Naira, which is one of the monetary policy tools she uses to control her economy. Another big disadvantage the single currency may pose to Nigeria is that she could lose the opportunity of using the exchange rate as an automatic stabilizer. A good example is when the CBN devalues the Naira when the nation is experiencing economic shocks, thereby making her exports cheaper and her imports more expensive. She might not have been able to do so, during the recession period, had the single currency been introduced by then.
For sustainable economic growth and development in the sub-region, intra-Africa trade is very crucial, because regional cooperation can bring down the level of poverty on the continent. The level of trade among ECOWAS members and African countries is too low to propel economic development in Africa.
According to the Foreign Trade Statistics Report by the National Bureau of Statistics (NBS), Nigeria only exported N195.2 billion worth of goods to other ECOWAS members in the first quarter of 2018 while her export to Netherlands alone was N963 billion during the same period. Also, Nigeria’s exports to her sub-regional neighbours stood at N782.66 billion in 2017, whereas, her export to China alone was N2.4 trillion in 2017.