ECOWAS Single Currency Programme: Understanding The Convergence Criteria

After 15 years of failing to shift the bargaining strength for the acquisition of a single currency, 15 nations under the Economic Community of West African States (ECOWAS) have once again saddled up to make the ECOWAS Single Currency Programme a reality.

Speaking at the Fifth Meeting of the Presidential Task Force on the ECOWAS single currency programme held in Accra on Wednesday, President Akufo Addo lead the campaign to ensure that all ECOWAS member states work towards fulfilling the requirements outlined to meet the deadline for the introduction of the ECO currency by 2020.

“The structural transformation of our economies can no longer be postponed if we are to meet the aspirations of our young people for jobs… The era of Africa’s industrialization has dawned so that we can also trade in the world economy, not on the basis of the export of raw materials but on the basis of things we make. Our quest for a single currency is not intended to boost trading of goods produced in third-party countries. It is meant to encourage the production of goods and services within the region,” the president said.

For the ECO currency to be actualised, ECOWAS states are expected to meet some convergence criteria.

Speaking on GBC 24, the Presidential Correspondence for the network, Edward Nyarko took time to explain what the convergence criteria entailed.

Convergence Criteria

As part of the plans to ensure that by 2020, West Africa sees the coming into fusion of ECO, there are a lot of challenges that need to be addressed.

According Edward Nyarko, it is expected that all member state hits a Single Inflation Figure.

In Ghana for instance, the figure has since October 2016 been declining from 15.8 percent; it ended 2016 with 15.4 percent.

In January 2017, the inflation inched down further to 13.3 and 12.8 percent in March 2017. It is currently at 10.3 percent.

If all the Anglophone countries are able to come to realm of a single digit, the next thing to look out for would be “the Debt to GDP ratio”.

According to Edward, “it must not be more than 4% and the deficit must also not be more than 3%.”

Ghana recorded a government debt equivalent to 73.40 percent of the country’s Gross Domestic Product in 2016. It would be a miracle to attain a single digit by 2020.

Also, on the convergence criteria is for every participating country to have what is termed the “Input Cover”.

Edward says the Input Cover simply means, “you should as a nation be able to have some reserve in dollars in the central Bank that can take care of the countries importation.”

“In Ghana, we import crude oil, food items…Currently as a country, we have something that can last us five months but the convergence criteria expect it to hit about six months,” he noted.

Edward says at the moment, Ghana is doing well to meet the convergence criteria but in terms of inflation, “we are lacking behind.”

“In terms of our import cover, we have more than what they are talking about. Debt to GDP ratio―Ghana is not there yet because we having a lot of challenges,” the GBC presidential correspondent added.

Nigeria In or Out?

Meanwhile, in a report by Nigeria’s leading newspaper, the Punch, the President of Nigeria, Muhammadu Buhari has warned member countries of the ECOWAS against hasty implementation of the single currency programme being planned for the sub-region by 2020.

Though not present at the symposium but represented by the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, it is Nigeria’s view that the Heads of Government have not properly articulated and analysed a comprehensive picture of the state of preparedness of individual countries for monetary integration by 2020.

Ghana as Headquarters

According to Edward, If the plans fall through by 2020, it is projected that the headquarters of the ECOWAS Single Currency would be in Ghana.

Ghana would however need about $200M to undertake this project, Edward reveals.

President Nana Akufo-Addo is nonetheless confident that the agenda would become a reality.

The president says, the step would facilitate trade as well as enhance economic development in the sub region.

“It is thus incumbent on us to strengthen the production base of our economies and to improve agricultural productivity and industrial production… There is a viable market ready to absorb the goods which will be produced by our countries,” the president said during the event.

By: Grace Ablewor Sogbey/ [email protected]