Are we ever going to see a single currency monetary zone in our lifetime? This article in the Punch makes that dream far fetched. Forget all the macroeconomic grammar, it’s unlikely this will ever happen in an election year. The stakes are just too high. Anyway, here is the article.
The January 1, 2015 take-off date for the use of a single currency under the West African Monetary Zone is no longer realisable.
The development was confirmed on Wednesday by the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, during the opening session of the 31st meeting of the Committee of Governors of the Central Banks of the West African Monetary Zone.
The six countries that made up the WAMZ are Nigeria, Liberia, Sierra Leone, Gambia, Ghana and Guinea.
The single currency was first planned to be introduced in 2003, but was postponed several times to 2005, 2010 and 2014.
At a meeting of the Convergence Council of Ministers and Governors of West Africa on May 25, 2009, the commencement date of the currency was rescheduled to 2015 due to the international economic crisis.
Emefiele said, “The launch of the monetary union by January 2015 is unlikely at this time. Despite this disappointing update, we need to use the new period created by this to redouble our efforts towards the final realisation of this objective.
“In this regard, there is a need for the intensification of efforts toward meeting the laid down convergence criteria in sensitisation of all stakeholders in the ratification of the various WAMZ protocols and in their implementation.”
The inability of some of the countries to meet up with the criteria had made the ECOWAS Authority of Heads of State and Governments to approve the reduction of the macroeconomic convergence criteria from 11 (four primary and seven secondary criteria) to six (three primary and three secondary criteria).
The three primary criteria that will now be used are budget deficit of not more than three per cent; average annual inflation of less than 10 per cent, with a long-term goal of not more than five per cent by 2019; and gross reserves that can finance at least three months of imports.
The three secondary convergence criteria that have been adopted by the ECOWAS authority are public debt/Gross Domestic Product of not more than 70 per cent; central bank financing of budget deficit should not be more than 10 per cent of previous year’s tax revenue; and nominal exchange rate variation of plus or minus 10 per cent.
But Emefiele, who was also named as the new Chairman of WAMZ, explained that over the years, appraisals had continued to show that the level of macroeconomic convergence in the zone remained inadequate relative to the set targets.
For instance, he said, “Since 2009, no two countries satisfied all the four primary convergence criteria consistently for two consecutive years.”