ECOWAS’ single currency
At the 4th meeting of the Presidential Task Force on ECOWAS single currency held in Niamey, Republic of Niger last week, President Muhammad Buhari appealed to member countries to tread carefully in pushing for a single currency in the sub-region due for takeoff in 2020. Buhari said some of the obstacles to the roadmap for the single currency include diverse and uncertain macro-economic fundamentals of member countries as well as unrealistic inflation targeting based on flexible exchange rate regime. He also said domestic issues in ECOWAS member countries relating to their constitutions and dependence on aid affect the frame work for implementing single currency. He said, “We are concerned that we have not properly articulated and analysed a comprehensive picture of the state of preparedness of individual countries for monetary integration in ECOWAS by 2020.”
Buhari also said the issues that compelled Nigeria to withdraw from the process have not changed because key questions and concerns have not been addressed. None of such issues has come up for consideration by the Taskforce, he said. He suggested a thorough review of the convergence roadmap and the constitution of an expert committee on each of the areas with a view to coming up with acceptable time frame, defined cost and identification of funding sources. In order to achieve comprehensiveness in carrying out this task, he suggested the involvement of relevant stakeholders such as ministries of finance, customs, parliamentary groups, tax authorities and the immigration services of member countries. President Buhari also called for a push towards ratification and domestication of legal instruments and related protocols and harmonisation of trade, \ monetary policies and statistical systems.
According to Buhari, fundamental economic issues continue to differ among member countries over the years, making it more difficult to pull through with the project. He said, “Nigeria advises that we proceed cautiously with the integration agenda, taking into consideration the above concerns and the lessons currently unfolding in the European Union.” He also said, “Nigeria will caution against any position that pushes for a fast-track approach to monetary union while neglecting fundamentals and other pertinent issues.”
ECOWAS Commission President Marcel Alain de Souza however said the sub-region’s single currency project is laudable and historical. He regretted that the project has taken too long to materialize. Nigeria, he said, has 70 percent of the region’s GDP with a population of 180 million, adding that it would play a significant role in facilitating the process of realizing a single currency. Member countries of the ECOWAS Task Force on common currency are Nigeria, Cote d‘Ivoire, Ghana and Niger.
Introduction of the euro by European Union members in January 1999 is the prime example of a single regional currency. There are arguments for and against this policy. Arguments in favour of it include an end to currency instability by irrevocably fixing exchange rates. Single currency facilitates currency transfers within and outside the sub-region just as it reduces the costs of such transfer. Single currency equally stimulates trade activities and free movement of capital, goods and people.
Disadvantages of a single currency include the effect of adopting one single monetary policy for all member countries without due regard to their different situations. Negative signals reported by a member country could result in depreciation of the exchange rate of the single currency even though the economies of other countries might be doing well. There would be loss of natural economic sovereignty as economically strong countries will have to co-operate with weaker countries. There is also the huge cost of transiting to a single currency which includes educating costumers, changing labels, staff training and changing computer software.
President Buhari’s call for caution on the regional single currency was well founded. Central banks within the subregion need to be deeply involved and empowered to steer the resolution of fundamental areas of common economic interest. They should also be empowered to implement actions that are critical for the single currency.