The Authority of the Economic Community of West African States (ECOWAS), alongside Heads of States and Governments, has adopted a flexible single currency ‘Eco’ as its trade currency to be issued by January 2020. This comes after the bloc’s 55th Ordinary Session which took place over the weekend in Abuja. The new currency could replace the Naira.
The regional body disclosed earlier that considerable progress had been made, leading to the adoption of the name “Eco” and a flexible exchange rate regime which will be issued starting from early next year.
Why was the Eco adopted? The introduction of a unified currency into the West African region is aimed at harnessing economic trade and integration among member-nations of the regional body.
[READ FURTHER: Nigeria is not ready for ECOWAS common currency]
In a communique read by Nigeria’s Permanent Secretary at the Ministry of Foreign Affairs, Mr. Mustapha Suleiman, the regional body was instructed to collaborate with West African Monetary Agency, West African Monetary Institute, and West African Central Banks for speedy implementation of the revised road-map, which will be presented at the next meeting.
Reports from sources disclosed that the Central Bank governors and West African Finance Ministers had earlier agreed on technical issues bordering the creation of the single currency for the bloc next year.
“At a ministerial level, we’ve established a road-map for the establishment of a new currency”, Ivory Coast’s Finance Minister, Adama Kone, stated in Abidjan.
Challenges ahead for Nigeria: Nigeria, which is the continent’s largest economy and the largest contributor to the region’s gross domestic product (GDP) by 75%, may soon have to contend with a challenge following this development.
Analysts are of the opinion that the adoption of the new single currency for trade within the region might have a catastrophic effect on Nigeria’s economy and the Naira. They have termed the move a “premature ideology” considering the region’s trade agreement which Nigeria has yet to sign.
As Nairametrics earlier reported, a report by SB Morgen opined that the adoption of a unified currency system may several shortcomings. The report also highlighted some major economic issues that call for concern.
The Eco could replace the Naira: The Nigerian Naira is a national symbol which portrays the nation’s identity in trade. The adoption of the Eco could send the Nigerian Naira into extinction. This will be reminiscent of what happened when the European Union adopted the Euro as a single currency.
Interest and Exchange rate adjustments: The adoption of the Eco could result in the monetary authority Nigeria (i.e., the CBN) losing its power to adjust the interest and exchange rates. The CBN adjusts the interest and exchange rates with the aim of encouraging investments whilst spurring economic growth.