This “Eco” is not what Nigeria should lose sleep on

By Omoh Gabriel

When in December 2018, I and other Nigerian journalist on board Egypt air from Cairo were stranded in Accra Ghana after missing our flight to Lagos, we opted to return to Lagos by road. The trans-Africa highway from  Ghana to Seme was smooth sailing until we arrived the Benin border post. We were subjected to all manner of treatment from paying for our passage to having our passport stamped. Some of our members on the team were angry and confronted the officials demanding why ECOWAS citizens should be subjected to ill treatment. The officials did not make any fuse of it, they all told us to our faces to carry our ECOWAS to Lagos. One in particular told us that there is nothing like ECOWAS. When some few of these countries decided on their own to adopt the Eco as their currency, I was not in any way surprised. The fresh speaking West African countries do not believe in ECOWAS and could not have championed Eco for the purpose of realising ECOWAS dream of a single currency. What I see is a political gamble by these countries that may lead to nowhere.

It is surprising that some Nigerians are asking the government to follow suit and adopt the Eco as proposed by these few members as the official single currency for the region. Monetary Union is the last stage of a regional economic integration. There is an institutions or organ of government set up to coordinate the implementation of a single currency in the region. As far as I know, the idea of a single currency for ECOWAS was mooted in year 2000. Ever since then the West African Monetary Institute has set down criteria to be meet by member countries before a single currency can come into effect. The Institute had set ten convergence criteria that must be met. For the avoidance of doubt and for those that have not followed the Eco story thus far, these criteria are divided into four primary and six secondary criteria. In the run up of things in the region as at fiscal year 2011, only Ghana has been able to meet all the primary criteria in any single fiscal year.

The four primary criteria to be achieved by each member country are; a single-digit inflation rate at the end of each year; a fiscal deficit of no more than 4 per cent of the GDP; a central bank deficit-financing of no more than 10 per cent of the previous year’s tax revenues; gross external reserves that can give import cover for a minimum of three months. 

Similarly, the six secondary criteria to be achieved by each member country are; prohibition of new domestic default payments and liquidation of existing ones; tax revenue that should be equal to or greater than 20 per cent of the GDP; wage bill to tax revenue equal to or less than 35 percent; public investment to tax revenue equal to or greater than 20 per cent; a stable real exchange rate; a positive real interest rate. The question to ask is which of these countries as of today has met these criteria. Of course non. Nigeria is even very far from meeting the primary not even the secondary criteria. Nigeria at the moment has inflation rate above the single digit, it runs a deficit financing and its tax to revenue not even to GDP is one of the lowest in the world.  

A closer look at the Eco as adopted by French speaking West African members of ECOWAS suggests an anti France movement that ended in the adoption, since it was not a decision of the ECOWAS Monetary Union. From media reports in Burkina Faso, Kйmi Sйba, a controversial Franco-Bйninois activist, has been spearheading a movement against the regional currency, the CFA. While many welcomed last months news that the West Africa’s CFA monetary union has agreed with France to rename its CFA franc as the Eco and cut some of the financial links with Paris, the fact it was French president Emmanuel Macron, along with president of Cфte d’Ivoire Alassane Ouattara, who announced the end of the West African CFA seems to only buttress the point that the decision was a fight  against what they saw as France’s “neo-colonialism. 

The West African CFA is used in eight countries Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo; while a separate Central African CFA is used in the other six countries; Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea and Gabon. The economies of the latter are more viable and sustainable than those that adopted the Eco to replace CFA. On December 21, Macron and Ouattara announced plans for a new regional currency called the Eco for West African users of the CFA and news reports claim reserves of the new currency will remain in West Africa at the Central Bank of West African States (BCEAO). This will be a marked difference from the CFA which operates under the requirement that half of its reserves are kept in the French treasury, which has fuelled suspicion of French economic control. The French speaking West African economies that adopted the Eco have only changed the name of their currency CFA to Eco to suit their ego. They will have to build up strong reserve to support their economies. If they fail to have sufficient external reserves, which the French has been giving them, their economies may collapse. 

The decision is not even a reaction to Nigeria closing its border as many would want us to believe. Their economies are small and have very low productive base. In fact all put together are not up to the economy of Lagos state. Nigeria as the largest economy in Africa will bear the burden of the Eco reserves when the chips are down. As of today the Central Bank of Nigeria is up in arms to keep the Naira exchange rate stable as many of the nationals from some of these countries are mopping up the dollar from the Nigeria foreign exchange market. It will be an economic suicide for Nigeria to rush into the single currency bid if the macro economic environment is not ripe for it.

It must be noted that in June 2019, the major financiers of the 15 ECOWAS countries stressed the importance of strengthening the macroeconomic convergence of the 15 member countries before adopting the single currency. The Nigerian government must follow the time table set for the implementation of the single currency and urge others to follow suit. The regional body responsible for Eco implementation must come out forcefully to tell member countries to respect the timetable for the implementation of the single currency. It must make it clear to all that performance in terms of macroeconomic convergence is a sine qua non for the Eco single currency to become a reality. 

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