25 August 2013

West Africa: The Story of the Common Currency in West Africa

The Economic Community of West African States established 38 years ago promises to transform itself from an ECOWAS of States to an ECOWAS of people. This pledge means more pragmatic approaches to regional integration through common trade and free movement of its people.

At the height of all its efforts at integration ECOWAS through the Heads of State and Government of resolved in Lomé, Togo in December 1999 to establish a Fast-Track approach to economic and monetary integration in West Africa.

Robert E. Asiedu is a businessman in Accra involved in the currency Exchange business and for him the issue of a single currency for member states even though a good idea is still far from reality.

"For me I know that it has been on the table for a while but then because of the African economics-our economies are not the same," says Asiedu.

The businessman who owns the Qwick Bureau D'Change in the busy commercial district of Osu on Oxford Street says, he has been involved in currency exchange for fifteen years now but the issue of integration as it relates to currency exchange is still a problem especially with currencies from struggling economies.

He said for a country like Liberia with a GDP per capita of US$ 700 to merge with Ghana which is a middle class economy with a GDP per Capita of US$ 3,500 in 2012 (CIA-World fact book)in terms of currency harmonization will be difficult.

"If you look at Ghana integrating with Liberia, it is going to take Liberia a very long time in terms of coming along with all the indices before we can really go on."

No change for some

Asiedu says that even though Ghana is a hub of trade for many in the region not all the currencies of member states of ECOWAS can be readily exchanged on the currency Market despite talk of integration heralded by the regional body.

"The only currency that is worth exchanging in West Africa is the CFA the West African Type- the one from Cote D'Ivoire, Burkina Faso , Togo, Benin," he says.

"The next one that you can talk about is Naira which is picking up now because of the increase of trade between Ghana and Nigeria."

The currency trader who talked to visiting journalists from the region during a busy working day says that there are some days that some Africans in the region and from other parts of the continent come into his bureau asking for change of their currencies into the Ghanaian Cedi.

He said these West Africans are turned away as there is no value for their currencies on the Ghanaian Market something he says make regional integration more difficult.

"It is basically because we've not been trading among ourselves and we tend to rather change into the foreign currencies rather than come here and then change because we don't really have a stable rate to change for the currency," he said.

One Currency

ECOWAS created a platform for any two or more countries in the sub-region to implement any aspects of the ECOWAS integration programs through the establishment of a single currency.

In 2000, the regional body declared its intention to accelerate the economic integration of the region by creating a second monetary zone, the WAMZ (West African Monetary Zone) in addition to the WAEMU (West African Economic and Monetary Union).

Both zones would in the final stage merge so as to create a single currency for all ECOWAS states around 2020 including Anglophone West Africa and Francophone West Africa).

Leaders in ECOWAS member states say they have a solution to the region's economic woes as it relates to free trade.

The West African Monetary Institute (WAMI) says its mission is to undertake preparatory activities towards the establishment of the West African Central Bank (WACB) which will eventually lead to the launching of the single currency to be used by all member states as a legal tender.

"We will have the introduction of the ECO which is the currency for the region; the currency design was completed in 2012 and the introduction is slated for January 2015," says Mrs. Eunice Ngozi Egbuna Director of Financial Integration at WAMI.

Foreign currencies top

Assurances by WAMI that a currency will be readily available in 2015, has been welcomed by Dr. Emmanuel Akwetey, Executive Director of the West African Think-tank Institute for Democratic Governance (IDEG) based in Accra even though he thinks the timeframe is too short.

He says conditions for the current common currency that will control inflation to ensure microeconomic stability is a good thing for the enhancement of conditions for integration in the region.

"But generally common currencies are good as legal tender that facilitates transactions moving from one place to the other and it strengthens the idea that we are one people using one currency. We have a long way, I think our economies are too weak to roll it out quickly," he says.

"I'm not sure how soon it will be because the foreign currencies are more recognized-the US dollars, Pound Sterling and Euros in West Africa ".

But Asiedu the money exchanger thinks the introduction of a single currency by ECOWAS through WAMI needs to come with more concrete assurances because the region is currently saddled to relying on foreign currencies like the United States Dollars and the Euros to determine the value of currencies in the region.

Continued Asiedu: "It means that you need to rather be working for the foreign currencies to pick-up before you have to buy Euros, you have to buy dollars and if you want to increase rates among ourselves, you have to go for someone's currency."

WAMI says the process of a single currency and the setting up of a common Central Bank is already gaining tremendous steam as WAMI has been able to set an initial capital for the Bank at US$ 200 million though the cost for the headquarters project cannot be easily projected.

As the issue of integration becomes key on the agenda of ECOWAS and the African Union many in the region are hoping that the issue of weak economies will be adequately addressed through the strengthening of trade among states with the currency harmonization made a priority something WAMI itself remains optimistic about.

"A lot of progress have been made and needs to be made for us especially on the qualitative and quantitative benchmarks," says Mrs. Egbuna.

"2015 is the deadline for the realization of this one currency program and it requires the political will of everybody in all our member countries for us to achieve this."

While West Africa waits for the introduction of this new currency, the region can only trade with the various currencies of the Anglophone countries which include Sierra Leone, Liberia, Ghana and Nigeria and the CFA that is used by the Francophone countries like Togo, Senegal, Cote D'Ivoire and Burkina Faso.

This story is courtesy of the DW-Akademie sponsored workshop on reporting on regional integration and ECOWAS, held in Accra Ghana in June 2013

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