Hannah Tetteh, Ghana’s Trade and Industry Minister, has called on ECOWAS members to put their acts together and work towards the realisation of the common currency dream that has for long remained a mirage.
Speaking at the opening session of a two-day West Africa Monetary Zone (WAMZ) Trade Ministers meeting in Accra last week, Ms Tetteh tasked member countries to show extra commitment to the ECOWAS integration agenda, and to the implementation of the various protocols.
She decried the persistent failure of member countries to meet the convergence criteria in times past, for which reason a new deadline of 2015 has been settled on. “If we are not guided by a sense of urgency, we could again be compelled to seek another postponement”, she said.
It is a generally accepted principle that in the regional integration process, a monetary union be preceded by completion of Free Trade Area arrangements and the creation of a Customs Union, but the effort of the region has been stalled by non-implementation of the various decisions and protocols.
The ECOWAS Trade Liberalisation Scheme (ETLS) was adapted about 20 years ago with the aim of ensuring the free movement of unprocessed goods and traditional handicraft products, but its implementation has been fraught with several challenges. Ms Tetteh pointed out that the holding of various meetings will achieve little without a commitment to implement.
Dr. Temitope W. OShikoya, Director General of the West African Monetary Institute (WAMI), stressed the need for attention to be focused on the effectively implement of regional decisions, citing trade as a critical tool in the monetary union and regional integration process. The introduction of the common currency in West Africa has suffered numerous setbacks over the years, seeing its deadline postponed in 2005 and 2009, and raising serious doubts about commitment of member states to the plan.
At their June meeting in Abuja, the Convergence Council of ECOWAS pushed further the launch of the ECO to 2015, citing the global downturn as the major factor responsible for the failure this time round. The also established a new road map for eventual launch of the common currency by 2015.
Between 2009 and the first quarter of 2013, the road map envisages the harmonization of the regulatory and supervisory framework for financial institutions, the establishment of a payment system infrastructure for cross border transactions, the completion of the e-payment system infrastructure in Guinea, The Gambia and Sierra Leone, and the completion of the ongoing integration of the financial markets of the region.
The establishment of the ECOWAS central Bank and the introduction of the Eco are slated for January 2015 with the full realization of the single currency dream expected in 2020. Ghana, Nigeria, Sierra Leone, and Guinea, four of the five countries in the zone, have consistently failed to meet the Convergence criteria of a single digit inflation rate, Central Bank financing of government deficit of less than 10% of the previous year's revenue, Government budget deficit of five per cent of Gross Domestic Product (GDP), and Foreign Exchange Reserves of three months of import.
Only the Gambia was able to meet all four criteria in 2007, but their situation has also been worsened by the global financial crisis. The introduction of a common currency is expected to lead to gains in economic efficiency resulting from the elimination of transaction cost and risks associated with uncertain fluctuation of the exchange rates. ECOWAS commission president Mohammed Ibn Chambas observed that the fragile economy of most West African countries makes the regional integration process even more compelling.
In an answer to this paper’s enquiry concerning the cost of keeping WAMI in operation for a very long time when the single currency still hangs, Dr Paul Acquah, Governor of the Bank of Ghana had said “even though it involves significant financial outlays, the eventual benefit of the union far out ways the initial cost”.
“Nothing good comes cheap”, he quipped. Many are also becoming skeptical about the stringent convergence criteria that has proved difficult to meet, and have called for a review of such requirements. In view of the huge cost implications for the delayed programme, renowned persons such as Arnold Ekpe, CEO of the Ecobank Group had called for the need to ensure a regional ease of convertibility of local currencies for member countries.
At a forum organised by ECOWAS and Ghana National Chamber of Commerce and Industry recently, Mr Ekpe said formalized trading and quoting in local currencies for member countries was enough to reduce the cost of transaction and enhance trading among West African Countries.He noted then that the use of a Real Time Gross Settlement (RTGS) system by banks in the sub-region would be a complement, to ensure smooth intra regional trade.
Source: Financial Intelligence
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