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ECOWAS single currency’s 2015 take-off date under threat

By on July 16, 2014

The inability of some countries within the West African Monetary Zone to meet up with the macroeconomic convergence criteria is currently threatening the January 1, 2015 take-off of the single currency regime for the sub region.

The development was confirmed on Monday during the 37th meeting of the Technical Committee of the West African Monetary Zone, which was held at the headquarters of the Central Bank of Nigeria in Abuja.

It was gathered that the inability of some of the countries to meet up with the criteria had made the ECOWAS authority of Heads of State and Government to adopt the creation of a fiscal union.

Similarly, the ECOWAS authority also approved the reduction of the macroeconomic convergence criteria from 11 (four primary and seven secondary criteria) to six (three primary and three secondary criteria).

The three primary criteria that will now be used are budget deficit of not more than three per cent; average annual inflation of less than 10 per cent, with a long-term goal of not more than five per cent by 2019; and gross reserves that can finance at least three months of imports.

The three secondary convergence criteria that have now been adopted by the ECOWAS authority are public debt/Gross Domestic Product of not more than 70 per cent; central bank financing of budget deficit of not more than 10 per cent of the previous year’s tax revenue; and nominal exchange rate variation of plus or minus 10 per cent.

The Acting Director, Multilateral Surveillance, ECOWAS Commission, Dr. Nelson Magbagbeola, said during the opening session of the meeting that the commission had also revised the road map with clear responsibilities assigned to the regional institutions involved in the monetary integration process.

For instance, he said, “The authority decided that the institutions of the West African Monetary Agency and the West African Monetary Institute should be retained subject to redefinition of their roles and pending the creation of an ECOWAS Monetary Institute by 2018 in accordance with a well defined roadmap.”

Magbagbeola said notwithstanding the challenges being experienced in meeting the convergence criteria, the commission would ensure that all other integration programmes under its watch were effectively implemented.

The other regional integration programmes, according to him, are the ECOWAS Common External Tariff, which comes into force on January 1, 2015; free movement of persons and the ECOWAS trade liberalisation scheme.

“The ECOWAS Commission remains committed to the monetary integration agenda and a sustainable development of our community with the overall goal of improving the quality of life of ECOWAS citizens,” he added.

The Deputy Governor, Economic Policy, CBN, Dr. Sarah Alade, said while the country was able to meet up with all the four convergence criteria in 2013, such could not be said of Liberia and Sierra Leone, which met only three of the criteria.

 

 

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