THE
inability of Economic Community of West African States (ECOWAS) to,
again, implement a single monetary union next year as earlier planned,
has been attributed to the failure of member nations to meet the
convergence criteria, which has necessitated the ECOWAS Authority
Commission to once again shift the new implementation timeline to year
2020.
The Governor of the Central Bank of Nigeria ( CBN) , Godwin
Emefiele and the Director General of the West African Monetary Institute
( WAMI) , Dr. Abwakwu Englama, both declared this yesterday in Abuja,
while addressing the 31st Meeting of the Committee of Governors of
Central Banks ECOWAS member states that have been attempting to
establish a single monetary union, known as the West African Monetary
Zone ( WAMZ) since 1990.
In fact, they both revealed that it has been difficult for up to
two member states meeting the criteria and sustaining them for two
years.
Disturbed by the repeated failure to meet implementation criteria
by member states, as well as to fast– track economic integration, the
sub-regional authority has among other initiatives, abolished with
immediate effect, the ‘residence permit’ requirement, which inhibits
the free movement of citizens within the sub - region.
The abolition, announced by the ECOWAS Commission President, Dr.
Kadre Desire Quedraogo on Monday, is to foster the free movement of
citizens to upscale the level of intra-trade within the sub-region, as
part of measures to fast-track the elusive monetary union, which has
remained on the drawing board for more than three decades when the idea
was first muted.
Kadreago, who spoke when he addressed the WAMZ Technical
Committee mid year meeting in Abuja, declared that the landmark decision
was adopted on July 10 in Accra, Ghana, at the last ordinary session of
the ECOWAS authority of Heads of States and Governments, aimed at
accelerating the establishment of the single monetary zone in ECOWAS by
2020.
In addition to the abolition of the residence permit , he said the
authority also adopted “ the creation of a fiscal union to complement
the monetary union and reduction of macroeconomic convergence criteria
from 11 criteria [ four primary and seven secondary criteria ] to six
criteria [ three primary and three secondary criteria].
The three primary criteria are budget deficit [ including grants
and on commitment basis] / GDP not more than three per cent ; average
annual inflation not more than 10 per cent with a long term goal of
plus or minus five per cent by 2019; and gross reserves of not less
than three months of imports.
The three secondary convergence criteria adopted by the authority
are public debt/GDP of not more than 70 per cent; central bank
financing of budget deficit of not more than 10 per cent of previous
year’s tax revenue ; and nominal exchange rate variation plus or minus
10 per cent.”
Emefiele who explained that the governors’s meeting was to for a
comprehensive review of the economic conditions of member states to
ascertain the levels of their preparedness for the establishment of a
sustainable monetary union in the zone, said though there have been
modest efforts but regretted that there still exist a lot of challenges .
The CBN Governor said : “It is gratifying to note that the Zone is
making significant progress; especially in terms of building the
necessary infrastructure and institutional capacity to support the
establishment of a sound monetary union. Amongst these milestones is the
progress made in the integration of national payment systems in the
WAMZ; establishment of the College of Supervisors of the West African
Monetary Zone (CSWAMZ); formation of Ministers of Trade Forum and the
ratification of Protocols on the ECOWAS Trade Liberalisation Scheme
(ETLS).
“Let me at this juncture, share with you the results of the state
of preparedness study commissioned by the 32nd meeting of the
Convergence Council. The study showed that the performance of Member
States’ on the convergence scale relative to that required for the
establishment of a monetary union is still inadequate.
“Also, member countries’ business cycle synchronization in terms of
real GDP, inflation, broad money and interest rates remained weak, and
their level of institutional preparedness for the monetary union remain
inadequate.
“On a positive note, the study, noted that member countries
continued to make remarkable progress towards the establishment of a
common market and the implementation of the ECOWAS Trade Integration
Protocols and Convention as well as significant progress towards the
reforms of their financial systems.”
In his own report, Englama dimensioned the challenge further to
state that only Nigeria has remained consistent, while other countries
have been slipping off the requirement.
His words : “ On member states’ status of compliance, with
macroeconomic convergence criteria, Nigeria was the only country that
satisfied all four primary criteria , while Liberia and Sierra Leone
satisfied three each. Sierra Leone narrowly missed the fiscal deficit
criterion with 4.07 per cent indicating a significant decline compared
with the 8.1 per cent in 2012.
“At this rate , Sierra Leone will achieve full compliance with the
primary convergence criteria by the next review. Liberia slipped on the
gross reserves criterion. The Gambia slipped on fiscal deficit and
central bank financing criteria , while Ghana and Guinea breached the
inflation and fiscal deficit criteria. Inflation and fiscal deficit
continued to be the more challenging criteria for Member States to
comply with , while central bank financing and gross external reserves
were the more frequently satisfied criteria.”
