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ECOWAS relaxes compliance criteria to hasten Monetary Union by 2020

By BusinessNews Staff on July 16, 2014

The Economic Community of West African States (ECOWAS) Commission yesterday said it has resolved to reduce the macroeconomic convergence criteria among member states to six, from the initial 11 in order to hasten the actualisation of the single currency project by 2020.

The commission had noted that the 2015 deadline for take-off of the single currency policy in the region was no longer feasible. It had severally adjusted commencement date for the monetary convergence following the inability of Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone to meet the set criteria for integration.

The drive towards the adoption of a single currency regime in the West African sub-region was originally fixed for 2003, but has since been postponed four times largely because of “mixed” progress among member countries in attaining the set criteria.

Speaking in Abuja at the opening of the 37th meeting of the Technical Committee of the West African Monetary Zone (WAMZ), acting Director, Multilateral Surveillance, ECOWAS Commission, Dr. Nelson Magbagbeola, who gave an update on the programme however, said the requirements have now been scaled down to six including three primary and three secondary conditions.

According to him, the new primary criteria demand that every member-country’s budget deficit, including grants on commitment basis should not be more than three per cent of Gross Domestic Product (GDP) while the average annual inflation should be single-digit with a long term goal of not more than five per cent by 2019, as well as gross reserves of not less than three months of imports.

He said it was also resolved that for the secondary criteria, the public debt to GDP ratio should not be more than 70 per cent while central bank financing of budget deficit to not be more than 10 per cent of previous year’s tax revenue and that nominal exchange rate variation should be within +/-10 percent.

However, Nigeria is said to be the only country which has so far met all primary convergence criteria.

It was also gathered that the African Heads of states and governments had approved the abolition of the residence permit which is to be replaced by the biometric identity card for the community citizens.

To this effect, ministers in charge of security have been advised to review all security implications of the measure before the signing of the Supplementary Acts on the resolutions.

Also, heads of government in each member countries further approved the roadmap to the January 1, 2015 take-off date for the ECOWAS External Common Tariff while members are advised to reduce non tariff barriers (NTBs) to the bearest minimum by reducing and consolidating checkpoints along the international transit corridor.

Magbagbeola also said the ECOWAS authority agreed that the West African Monetary Agency (WAMA) and West African Monetary Institute (WAMI) should be retained subject to the re- definition of their roles pending the creation of an ECOWAS Monetary Institute by 2018 in line with its roadmap.

Also speaking at the occasion, Nigeria’s Minister of State for Finance, Alhaji Bashir Yuguda admitted that meeting the set criteria had often posed a challenge given that member countries have peculiar economies with varying challenges.

He noted that the recent rebasing of Nigeria’s GDP particularly posed a challenge of sustainability of parameters.

But he said efforts must be made to surmount all barriers and meet the parameters if the single currency project must be achieved within the specified time frame.

He said the federal government attaches great importance to the proposed monetary union which he described as the last stage of any union in the region.

He, however, expressed optimism that with the reality that the region needed to emerge as an economic block coupled with the commitment from political leaders, the single currency drive could become a reality.

“But of course, it has to be done right, so that we don’t start something that is not sustainable and that is the essence of all these meetings,” he said.

He added: “We need to look at the realities on ground; we are talking about monetary union and we are talking about six different countries- their economies are different and the challenges are different or maybe similar.
“So all we are saying is we need to look at the realities on ground and then take the right decisions in the monetary union.”

On her part, Central Bank of Nigeria (CBN) Deputy Governor (Economic Policy), Dr. Sarah Alade, said current emphasis would be on the state of preparedness of member countries for the monetary union.

She added:”We all have challenges and you know that it hasn’t been easy- countries have been going through difficult times and that’s why it hasn’t been possible to meet the convergence criteria from year to year.

“This year you have a country meeting all the four convergence criteria and another year, that same country meets only three. We had insisted that we needed it met from year to year.”

The technical meeting is expected to advise and prepare the central bank governors of respective member countries prior to their subsequent engagement with the ministers of finance.

[This Day]

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