ECOWAS leaders have taken note of the impossibility of launching the single currency soon in West Africa. Only one country in the zone meets the convergence criteria, Togo. Also, states will adopt a new roadmap.
The transformation of the CFA franc into an economy is not for tomorrow. Unsurprisingly, the Conference of Heads of State and Government of ECOWAS (Community of West African States) took note on September 7.
The meeting paved the way for a new stage in the process of this currency, the eco, which will replace the CFA franc and integrate all fifteen West African countries. The modalities of a new “road map”, which some already describe as a revision of the macroeconomic convergence criteria, remain to be clarified.
During the “economy” section of the meeting – essentially devoted to the situation in Mali – Ivorian President Alassane Ouattara reportedly declared that the eco, as cash or fiat money, could not see the light of day before “a period of time. from three to five years”. During this period, we will continue to use the CFA franc, which is “a good currency appreciated by all and especially by neighboring countries”. We know the Ivorian president is reluctant to leave the CFA franc, especially because of his stability vis-à-vis the euro.
Nigeria, for its part, does not hide its reluctance either. President Muhammadu Buhari observed that only one country has so far met all the convergence criteria, prior to the creation of a single currency: Togo.
These criteria are, for the main ones, to have a deficit below 3% of the GDP, to have an inflation lower than 10%, and a debt lower than 70% of the GDP. In the ECOWAS area, eight countries use the CFA franc and seven others mint their own currency. Not all currencies are convertible with each other yet.
However, during the meeting of heads of state, the Nigerian President declared that his country “remains committed to the implementation of the action plan for the updating of the Monetary Union program and the single currency of ECOWAS”. Consequently, he called on the member states to support the resolution of the heads of state of the Community and he urged his neighbors to continue their efforts towards convergence.
He called on Africans “to find African solutions”, suggesting that they beware of “foreign interference and so-called advice”. Muhammadu Buhari nevertheless admitted that “the premature adoption of the eco has increased the disaffection and distrust of members of the emerging monetary union”.
A delayed launch!
For his part, Alassane Ouattara is reassuring that the single currency will be created sooner or later. The delicate question of the exchange rate, which divides African leaders, seems to find some answers: “When the eco will be stopped, we will be able to enter into an evolution towards a flexible exchange rate and have a federal central bank.”, Underlined the Ivorian president.
For his part, President Mahamadou Issoufou (Niger) urged his colleagues “to develop a new roadmap while maintaining a gradual approach for the launch of the common currency”. Initially, the single currency was to be launched in July 2020, but the health crisis soon made it impossible.
In its final press release, ECOWAS makes it clear that the heads of state and government have decided to draw up a new “road map” for the single currency program of ECOWAS. Consequently, it decides to “postpone” the launch of the said currency.
In view of the health crisis, ECOWAS must exempt Member States from complying with macroeconomic convergence criteria in 2020. It is therefore necessary to conclude between ECOWAS Member States “a new pact for convergence and macroeconomic stability”. No question of giving up the eco: ECOWAS intends to “maintain the gradual approach” for its launch.
Countries are not starting from scratch. Thus, the Conference “welcomed” the economic convergence, “which has improved in 2019 compared to 2018”. However, she notes that even if the convergence ended on December 31, 2019, the necessary conditions allowing ECOWAS to move to a phase of stability and consolidation of performance are not met, as set out in the Convergence Pact and stability. It also notes the negative impact of Covid-19 on member states’ compliance with the convergence criteria in 2020. Hence the sine die postponement of the operation.
Note that in France, the National Assembly is currently examining a reform of the agreement with the member states of the WAEMU (West African Monetary Union). Announced by Presidents Ouattara and Macron, this reform, if successful, removes two features of the current euro parity guarantee scheme. The Central Bank of West African States will no longer be required to deposit 50% of its reserves in a French Treasury account and the presence of French representatives in the governance bodies of the ‘Monetary union.
In addition, the ECOWAS Conference called on the five Member States which have not yet ratified the AfCFTA (African Continental Free Trade Area) agreement to “urgently take the necessary measures to do so” and to deposit their instruments of ratification. In addition, the Conference calls on Member States to ratify the African Union Protocol on Free Movement.
