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Will ECO the much touted common currency for the West African countries remain a pipe dream? A precise answer is not possible at this juncture since there is a lot of undercurrents which can upset the apple cart. What does that hold back the introduction of Eco to replace the CFA franc? www.trendsnafrica.com takes stock of the pressures and counter pressures surrounding the much awaited Eco.
To put the fact straight, a bill was adopted in May 2020 by the ECOWAS members to change the CFA franc to the Eco. The underlying objective was to end the centralization of foreign exchange reserves of the West African states with the French Treasury, which to a large extent controlled the monetary policies of the eight states in the grouping through an age old system, which stipulated the member countries to park a certain portion of foreign exchange earned against a guarantee by the French Treasury to release the fund as and when the need arises. Admittedly, it was a legacy from the colonial past. It worked alright for the erstwhile French speaking colonies. The Bill later proved to be a non-starter, though an agreement was reached between the French government and eight countries in West Africa to launch the currency last year itself.
Between May and September 2020, a lot had changed in the West African political dynamics. In September, Ivorian President Alassane Ouattara had threw a spanner by announcing that the year of launch of Eco would be pushed back due to the Covid-19. The timeframe for postponing the launch was not specific; three to five years because of COVID-19. The proposed summit to launch the new currency was also cancelled.
The real reasons for postponement of the launch, a closer look, would reveal, was more than the pandemic. The convergence criteria for launching the single currency were way beyond the achievable realm of most of the countries in the region. What are those criteria? An assortment of stipulations including inflation threshold, debt-to-GDP ratio, budget deficits and their financing, reserves, exchange rate stability etc were much beyond the manageable levels of the countries in the grouping. Fiscal prudence and discipline was a far cry in most of the countries. The criteria was similar to those laid down before the formation of the EU. But among the member countries, there was no leader like Germany, which could play a pivotal role as a big brother in the grouping.
Those overriding stipulations were, no matter, imponderables. It was further compounded by the heterogeneous composition of the grouping. For instance, in the West Africa, there are both English and French speaking countries. While French speaking countries had affinity towards their ex-colonizer, that was not the case with English speaking countries like Nigeria in the grouping. Nigeria’s affinity was mostly with the English speaking world, such as Britain and the US.
Nigeria is the region’s largest economy accounting for 65% of the region’s gross domestic product (GDP) and about 50% of its total population. It is also one of the region’s two net oil exporters. Undoubtedly, Nigeria is unequal among the equals in the region. Can Nigeria play an anchor sheet like Germany played for the EU? Given Nigeria’s history of fiscal indiscipline and its Central Bank’s lack of independence, shepherding the transformation among the countries in the region would be difficult.
Can the Eco region exclude Nigeria from the grouping? As the largest funder of the ECOWAS budget, Nigeria has significant political power in the region. The grouping becomes almost a non entity with the exclusion of Nigeria. That is geopolitical reality.
There are sentimental reasons that could come in the way for adoption of Eco from the new generation Africans, who want to bury their colonial past, while looking forward towards an economically strong Africa. CFA is a vestige of French colonialism because of the French Treasury’s continued role in its management. That being so, the joint announcement of Eco by Ivorian President Ouattara and French President Emmanuel Macron in December 2019 to switch over to Eco did not go well since Eco carried a French Treasury guarantee similar to the FCFA arrangement. Many doubted whether it would be a new wine in the old bottle. Interestingly, Nigeria’s President Muhammadu Buhari wants to drive West Africa policy to counter the influence of France in the region. There are also people who are questioning the relevance of Eco against the backdrop of the launch of African Continental Free trade Area (AfCFTA).
