What Can Make Nigeria Abandon Naira for ECOWAS Currency
By Adedapo Adesanya
Nigeria could swap the Naira for the single currency being proposed by the Economic Community of West African States (ECOWAS) if good monetary and fiscal policies are put in place, Business Post analysis shows.
Originally intended to be launched in 2000, the ECO, which is the currency being considered, has been postponed multiple times; and the newest target date set is 2020.
With this, it means six member countries, including Nigeria, Liberia, Sierra-Leone, and Ghana; could swap their currencies for the ECO. ECOWAS countries like Benin Republic, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal, and Togo currently jointly use the CFA franc.
The 15-member group had announced at the end of an ECOWAS summit in Abuja in July 2019 that part of its plans was to redress the region’s economic problems. It was stated at the gathering that the adoption of ECO could set things in motion.
Mahamadou Issoufou, the president of Niger Republic, who also doubles as the ECOWAS chairman, explained that there was a real firm political will to increase efforts ahead of the January 2020 deadline.
“We are of the view that countries that are ready will launch the single currency and countries; that are not ready will join the programme as they comply with all six convergence criteria,” Issoufou said at the past ECOWAS meeting.
However, the African Development Bank Group (AfDB) in a report said; “The 2020 deadline for the single currency will most like be postponed again unless West African countries can align with their monetary and fiscal policies.”
But ECOWAS has since pushed ahead as it stated that it will be working with the West African Monetary Agency (WAMA), the West Africa Monetary Institute (WAMI), and central banks of West African nations to speed up the implementation of a new road map for the proposed single trade currency.
On Nigeria’s part, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, recently noted that the proposed date for the commencement of a single-currency regime for West Africa may not be realised as many countries within the region have yet to meet the criteria for the monetary union.
She said only Togo had met criteria to adopt the ECO, and with only the country achieving this, it would be difficult to operate the single currency regime by next year, which is just few days away.
To be able to adopt the single currency, key demands for entry are for countries to have a deficit of less than 3 percent of gross domestic product (GDP), inflation of 10 percent or under and debts worth less than 70 percent of GDP, but Nigeria’s GDP stands at less than 2.3 percent (Q3 ’19) while its inflation as at November 2019 was 11.85 percent.
However, despite the increase in the Nigeria’s debt profile, the country’s debt-to-Gross Domestic Product (GDP) ratio is still well below the average for sub-Saharan Africa and Africa as a whole as the International Monetary Fund (IMF) noted last month.