History of discussions on single currency
Since the 1990s, the fifteen countries comprising the group ECOWAS (Economic Community of Western African States) have been in discussions over joining a single currency. However, it was only in December 2000 that the goal of a single currency was made into an official aim. Although it was agreed to introduce the Eco in 2003, the implementation of the currency was postponed numerous times, one of the later reasons being the global financial crisis of 2008-9.
Motivations for single currency
Currently in West Africa, eight of the countries’ economies use the CFA franc, which is tied to the euro. As a result, these West African economies are greatly limited in the economic decisions they can take, because they are so affected by the European Central Bank which sets the monetary policy of the euro. Joining the Eco would make these economies independent from the European Central Bank, and also bridge the gap between them and the other West African economies. Another major motivation for joining a single currency would be to protect West African economies from the impact of major international financial crises, such as occurred in 2008-9. The joint currency would provide a strong barrier against the potentially ruinous impacts of a global financial crisis, and would also create a strong political union, which would be more influential in international affairs. The Eco is also favoured because it will aid the flow of trade between West African states who will no longer have to consider exchange rates of their own currencies when deciding trade deals.
On the 29th June 2019, the ECOWAS launched the plan to adopt the Eco by 2020. It was decided that the exchange rate will be flexible, and the central aim of the monetary union would be to keep to a specific, low inflation rate. It was reported that the fifteen economies which make up the ECOWAS shared a strong political will to achieve the aim of a joint currency very quickly.
Concerns with joint currency
However, there are ten criteria that each economy must meet to join the Eco, including have a single-digit inflation figure at the end of each year, and not having a fiscal deficit exceeding 4% of GDP. The primary criteria have only been met by Ghana prior to 2011, and Liberia in 2016. As a result, some economists argue that West African economies need to first tackle their poor infrastructure and bureaucracy (which slows down trade), rather than trying to join a single currency. However, economist Martial Belingasays says that the 2020 goal pushes the West African economies to meet the criteria, which will encourage them to tackle their own economic problems in the process.