Eco Common Currency And Gulf Between

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If it goes according to schedule, the currency of the West African Economic and Monetary Union (UEMOA) since 1945, the CFA franc, would have ceased being a legal tender by the time you read this.

A bill passed by the French Council of Ministers in May this year, ratified a series of reforms in the currency arrangements that had seen France indirectly managing the monetary policies of its erstwhile West African colonies since after World War II.

Basically, France had since 1945, guaranteed the convertibility of the CFA franc through the French treasury which also held control of 50% of the foreign reserves of the member countries, paying them a miserly interest of 0.75%. France also holds the veto power in the central bank of the UEMOA states.

>span class=”s1″>But France is still not letting go of the stifling economic and political grip on these former West African colonies, whether in the CFA or Eco regime.

Incidentally, Eco is the name that the Economic Community of West African States (ECOWAS) to which they and seven other (mostly Anglophone) countries belong, had chosen for the common currency they have been planning for decades. The Eco was first to be introduced in 2003, by five countries, namely Nigeria, Ghana, Sierra Leone, Liberia and The Gambia, but it failed and was postponed to 2005 which failed too.

It was in this state of serial failures that the president of Cote d’Ivoire, Alassane Ouattara, and French president, Emmanuel Macron stole the thunder from ECOWAS, announcing late December 2019 that the UEMOA states would be adopting the Eco as their new currency. This announcement turned out a rude awakening for the WAMZ states (Nigeria, Ghana, Sierra Leone, Liberia, The Gambia and Guinea, all of which have their own national currencies) working with UEMOA states on the ECOWAS platform to introduce the Eco as their common currency.

So, when Ouattara and Macron announced the Eco as the new currency of the UEMOA on December 21, 2019, Nigeria protested and called the move unilateral.  A meeting of the WAMZ was hastily summoned at Abuja early January, at the end of which Zainab Ahmed, Nigeria’s finance minister read out a statement on behalf of the body saying that the move by the Ouattara group was inconsistent with “the decision of the Authority of the Heads of State and Government of ECOWAS for the adoption of the Eco as the name of an independent ECOWAS single currency.”

 The statement added that the “ WAMZ Convergence Council wishes to reiterate the need for all ECOWAS member countries to implement the decision of the Authority of the Heads of State and Government towards the implementation of the revised roadmap of the ECOWAS single currency programme.”

 By March, the coronavirus pandemic swept through West Africa as it did much of the world, and all energy was diverted towards containing it. It was the bill passed by the French Council of Ministers May 20 that brought the Eco issue back to the limelight.

 As the countdown to the June 30 deadline ticked on the clock, an emergency virtual meeting of the WAMZ heads of state was summoned at which President Buhari made strong statements concerning the Eco.

 According to Femi Adesina, the president’s spokesman, Buhari said at the virtual meeting which held June 21:

‘‘Your Excellencies, you all are familiar with the history of the Eco thus far, so I w0ill not bore you with that. We reverted to a single track approach, giving up Eco which is the original idea of the WAMZ so the ECOWAS-wide programme could thrive.

‘‘In this regard, we have made remarkable progress including the adoption of the Exchange Rate regime, the name and model of the common Central Bank and the symbol.

‘‘We have urged our Ministers towards an expeditious path to success. It, therefore, gives me an uneasy feeling that the UEMOA Zone now wishes to take up the Eco in replacement for its CFA Franc ahead of the rest of the Member States.

‘‘This is in addition to deviating from the Community Act on a consistent attainment of convergence in the three years running up to the introduction of the currency, and our subsequent reinforcing directives.

‘‘I am informed that the French Ministers have approved a bill to reform the CFA Franc and most, if not all of the UEMOA Member States, have already passed legislations in their various Parliaments to that effect.

‘‘It is a matter of concern that a people with whom we wish to go into a union are taking these major steps without trusting us for discussion.’’

Since after this WAMZ heads of state meeting and Buhari’s statement, it has been all quiet on the UEMOA front. With just a few hours to June 30, the CFA franc remains alive and there are not even sneak previews of the Eco. This gives hope that the spat between the twin blocks of ECOWAS may yet be settled diplomatically.

 At the heart of the matter is an extant and growing resentment about France’s continued meddling with its former colonies more than 50 years after independence. The Anglophone states take an exception to that. And increasingly, citizens of the Francophone states are growing sick of it and publicly demonstrating against it, particularly in Cote d’Ivoire and Senegal. In fact, observers feel that Ouattarra is championing the dissolution of the CFA as a ploy for votes as he faces an election this year.

Countries in the region have historic reasons to be wary of France. In 1962, Malian president, Modibo Keita tried to create his own national currency, but was immediately deposed in a coup d’etat by a former French legionnaire. Keita died in prison subsequently. The following year, Sylvanus Olympio, first president of Togo, tried to create his own national currency, but was swiftly overthrown and killed by another former French legionnaire, Gnassingbe Eyadema whose family rules Togo till today. As recently as 2011, Laurent Gbagbo, then president of Cote d’Ivoire, contemplated walking the same road, but was equally overthrown by French troops aided by local rebels. With such a record, many West African states are wary about getting into bed with France.

 And France isn’t tired yet. Senegal’s president, Macky Sall, informed the press that the new Eco would be guaranteed by the Euro, of course via the French treasury. This would mean a continuation of the disagreement with other ECOWAS countries. France had lived off the commodity surpluses of these nations. Indeed, Italian deputy prime minister, Luigi di Maio, said that were it not for this colonial arrangement, France  would have been the 15th biggest economy in the world and not within the top six where it is now.

 While the WAMZ countries loathe the colonial arrangement of the CFA franc and the continued French interference in the Eco, the experiences of these WAMZ countries scare the daylights out of the CFA countries. The French franc and later the Euro, have guaranteed the convertibility of the CFA at a fixed exchange rate. So, for member countries, there is no worry about forex cover for imports; nor worries about exchange rate induced inflation. Besides that, France has managed the CFA zone with very tight monetary policy. Inflation hardly goes beyond 2.5%.

 But the tight monetary policy also means squeeze on investments – both public sector and private sector. Infrastructural development has been very slow comparatively. These countries showcase little else besides beautiful capital cities, unlike their Anglophone neighbours that boast infrastructural development outside national capitals.

 For the WAMZ countries, it has been a rollercoaster ride managing their national currencies. Money creation has been at the whims of whoever happened to be in power and it often has little to do with economics. Currency devaluation is a regular resort of governments to create quantum local currencies for recurrent expenditure. Of course, they worry little about the inflationary outcomes. Inflation rates are normally double digit and often above 15%. The governments, in such abuses of the electorate’s trust and mandate, care little about what that does to the citizens. They paint the perfect picture of banana republics – proud banana republics.

 These UEMOA countries are just not being queasy about becoming like their neighbours. Recognising the necessity for sound economic footing for the common currency, the WAMZ had set up convergence criteria for members  countries regarding the Eco. These include:

•sustaining single digit inflation rate at the end of each year by each member state.

• ensuring a fiscal deficit of not more than 4% of the Gross Domestic Product (GDP) of each member state.

• limiting Esther central bank deficit to not more than 10% of the tax revenue of the preceding year and

•maintaining gross externally reserves that can provide important cover for a minimum of three I c months.

•meeting tax revenue mark that is equal to or greater than 20% of the GDP

•sustaining a wage bill to tax revenue that is equal to or less than 36% of the GDP .

•ensuring a stable exchange rate  

• ensuring public investment to tax revenue equals to or greater than 20% and 

•prohibiting new domestic default payments and liquidating existing ones.

While the uneasy quiet over the Eco lasts, observers wait to see if Ouattara would go ahead to poke into the eyes of Nigeria which has for years been his country’s biggest trading partner in ECOWAS.

– The Sun

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