The idea of a single currency for the West Africa sub-region was in the news again last week, as President Mohammadu Buhari warned member countries of the Economic Community of West African States against hasty implementation of the single currency program being planned for the sub-region by 2020.
If we go by the principle of economic integration, our position here is that we do not see anything wrong with the idea. Other countries have done it, typically Europe. But it takes a long period of time to achieve that because in an economic integration, there are many stages.
The last stage is usually economic union which obtains in Europe where you do not only have same currency, same tariff, and same customs duties in terms of what you charge, but also same currency.
But given our kind of economy and nature of development here in West Africa, are we really ready for it? Do we have the infrastructural facilities to drive this policy? Your guess is as good as we’. But if we have all it takes, if our economy is as good as Europe’s, then we see nothing wrong with the single currency project.
Nevertheless, it is important to note that for the proposed single currency project to succeed; all the West African countries will need certain kind of technology, especially the modern day Information and Communication Technology to drive such a policy.
The biggest advantage of having single currency is that it allows for easy transactions across borders. Individuals across the sub-region can move into Ghana and other participating countries without having to go to a bureau de change to look for the currency of the country he or she want to transact business in.
What is required for the economic integration to succeed is that the participating countries need to put certain things in place, which this paper does not believe we have now.
We already know of our President’s position on the single currency issue, which is that the countries involved still do not have all the required indices and that we should learn from what is happening with the European Union. For Nigeria or West Africa, we need to put certain things in place.
What the drive for single currency here entails is that it provide opportunity to have a larger economy to trade without currency barriers. The whole essence is that we do not have to worry anymore about the change of currency.
Another big advantage that will accrue from currency integration is that the single currency will make the countries involved to enjoy economies of scale and conversion would be taken care of. But it is something that could backfire if the background of what ought to be done for a single currency to have a positive effect is not done.
Apart from Nigeria, how many countries in West Africa have a population of over 30 million? So, having a single currency in West Africa will be good. Our fears and worries have to do with the challenges that may crop up. Some of the challenges are the exchange rate and differences in language, because in West Africa, we have Francophone and Anglophone countries.
Again, we may also have the challenge of differences in the kinds of economy each country runs and how they will fuse into the single currency regime. For instance, it will be good for somebody who has a factory in Ogun State to target the market in West Africa to sell his or her goods.
Another challenge envisaged is customs. We have to be sure of the regulations, and they must work according to the dictates of the policy that would govern the single currency regime.
Overall, we align with Nigerian government position that there is a need for caution. Currency plays a central role in the development of any country. There are activities that need to be carried out to ensure a smooth acceptance and other issues involved in currency application.
All the countries involved have to do enough ground work to analyze the issues for the single currency adoption being proposed. We call for better understanding and clearer presentation of the issues involved before the adoption. But in principle, it is a great idea.