SHOULD NIGERIA ADOPT THE ECO CURRENCY?
Written by Oladele Abigail
On the 28th of May, 1975, Head of states and presidents of fifteen different states in West Africa converged in Lagos, Nigeria to sign a treaty that established the Economic Community of West Africa States (ECOWAS).
The fifteen nations include Benin Republic, Burkina Faso, Cape Verde, Cote d’ Ivoire, The Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Sierra Leone, Senegal and Togo.
The objective of this treaty is to promote cooperation and development among member states, harmonize various policies (such as monetary policies, economic policies, industrial policies, agricultural policies), establish a common tariff, abolish trade restriction and many others.
The community has been able to achieve some of these objectives through the creation of specialized agencies like The West Africa Monetary Agency (WAMA), Inter-government Action Group Against Money Laundry and Terrorist Financing (GIABA), ECOWAS Bank for Investment and Development (EBID) to name a few.
ECOWAS is one the five regional pillars of the African Economic Community (AEC) and have three official languages: English, French, and Portuguese.
One major objective of the West Africa community which haven’t been fully achieved is the creation of a common currency among member states. the goal has been made, plans also have been made but there has been no implementation.
However, In the third quarter of 2019, the West African leaders revisited the issue of creating a common currency and concluded that the common currency which will be known as the ECO currency should be established in 2020.
It is important to note that at the moment, eight countries make use of a common currency referred to as CFA Franc and the remaining seven use their own currencies.
Is Nigeria ready for the single currency?
Member countries who will adopt the Eco currency must have fulfilled ten criteria’s which include a single digit inflation rate, a fiscal deficit of no more than 3% of the GDP, a stable real exchange rate, a positive interest rate, gross reserves able to finance at least 3 months of imports, Public Debt or GDP of not more than 70 percent and some others.
Since this criterion was put in place, all west African countries except Ghana failed to meet the primary criteria. Nigeria is already disqualified using these criteria. only Ghana has been able to meet all the primary criteria in any single fiscal year.
It seems less emphasis has been placed on meeting the criteria. However, stakeholders of the economy advised the Federal government against adopting the single currency.
There is always a two side to a coin; the head and the tail; the advantage and the disadvantage.
The intention of the west Africa community in creating a single currency is very reasonable as it comes with some benefits in which all member countries will enjoy.
Commercial activities will become smoother and business people will be free from foreign exchange which will make inter-trade bloom and at the end, their objectives will be achieved.
However, each country has to look into this matter critically to know if the ECO currency should be adopted.
Looking at the other side of the coin; The adoption of the ECO currency means a loss of national sovereignty. There will be aharmonization of monetary policies, economic policies and probably industrial policies.
The central bank of Nigeria will have very less operations as most monetary and economic decisions will be taken at a higher level.
Let’s also note that we definitely can’t have the same inflation rate and most of our macroeconomic rates won’t be the same with other countries. How then will decision be made considering disparities in these rates?
To recall, Nigeria will soon start the importation of rice to other countries and would soon start the importation of petroleum products when Dangote’s refinery commences operation. The adoption of the single currency could pose a threat.
Nigerians export her products to other neighboring nations which include the west Africa nations. The gains from foreign exchange will be scrapped if the Eco currency is adopted. This will lead to a reduced income. If the Nigeria government is thinking of adopting this policy, it should also provide us with an alternative source of income or how it feels we could leverage on this opportunity to our advantage.
The question now is if Nigeria is ready to adopt this currency? Is Nigeria ready to lose one of its national symbol; is Nigeria ready to loose its national sovereignty? And more importantly, are Nigerians ready? Are we ready to stop saying “Naira and say Eco?”
To conclude, the monetary authorities have to sit and look critically into this issue and as experts have warned the Federal Government, they should not rush to adopt the ECOWAS currency, instead they should sit and seek for counsels from the stakeholders of the economy.
Written by Oladele Abigail
Oladele Abigail, an economics graduate of Bowen University who applies her passion for writing to her career path.
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