The Eco-Currency: A West African Monetary Union

The Eco is the proposed name for the single or common currency that the West African Monetary Zone (WAMZ) plans to introduce in the framework of the Economic Community of West African States (ECOWAS). This currency would go on to be adopted by both the WAMZ and West African Economic and Monetary Union (UEMOA).

Although this proposed currency would remain pegged to the Euro, this would be the first time the involvement and influence of the French Treasury would cease since European expansion into West Africa during the colonial age. The proposal will bring a need to the French controlled CFA Franc and its UEMOA.

One of the main aims of the ECO is intraregional trade.

If adopted countries across the region will be able to move and spend money across different countries without any concerns about exchange rates and the cost of these, cost often heighten by serious volatility in exchange rates throughout the West African Economies.

The ECO is assumed to have a huge potential that allows each country to specialize. The ECO would mean that the need of economic independence, due to barriers to trade, would be a factor of the past. The smooth exchange of goods between the member-states would mean interdependence could lead to national and regional specialisms.

Despite these possible benefits, many remain worried that without pre-existing integration on other monetary policy areas, the ECO faces an uphill battle if adopted.

Another area of doubt around the ECO is that of the ten convergence criteria that each country would be required to meet for the ECO to be implemented.

These major requirements have been set out by the West African Monetary Institute. Up to the 2011 fiscal year, only Ghana has been able to meet all the primary criteria followed by only Liberia since, with both only maintaining these criteria for one fiscal year. The difficulty of reaching these goals is far from the main issue. Many critics say these aims only take into account the short-term ability of a member nation to maintain these levels of Nation Debt, Gross external reserves worth, and average annual inflation rate. The grand goals of a stable and growing economy have not been the focus of West African nations who have aimed at reacting and adopting the ECO.

Some, however, take problem with the main goal of the ECO altogether. If the goal of the ECO is to boost trade, some analysts are sceptical that a single currency is key. In a region where domestic travel and trade is already hindered by lacking infrastructure and poor bureaucracy, how can the benefits of interregional trade even be felt? This is reflected by the head of Alpha African Advisory, who said, "If goods can't move freely, how can we even talk about a single currency?”

Nigeria, being the largest economy in the region and ECOWAS, is situated in a position of potential dominance of monetary policy and is projected by that to be the biggest beneficiary of ECO.

However, its oil-dependent economy, which accounts for two-thirds of the region's GDP, could lead to the ECOWAS’s effective head being reliant on the price of oil, an already unreliable backing which has plagued Nigeria domestically for years.

Although some economists have compared Nigeria to Germany's weight in the eurozone, Nigeria would be far more dominant in the ECO and not restricted by German reluctance or have a France- sized counter weight.

Others, on the other hand, talk about the inevitability of a de-facto head of the Monetary Union. They say that in reality, this is in principle, replacing the French dominated Monetary Union with one at least dominated by a West African Nation.

Although some describe the CFA franc as a colonial relic, the Francophone countries might be hesitant to join a union with countries that have much higher levels of inflation and interest rates. Other see the need to disconnect from the franc as being greater than any instability it creates.

Due to the pandemic, another five years has been added to the launch date of this new currency; a launch that has been postponed no more than four other times since 2004. The progress towards a Monetary Union is still far off, as nations struggle to meet criteria. The aim of the region to remove French control and increase interregional trade has the region set for greater need of similarity and integration, currency union or not.