West African single currency: Why Nigeria should tread cautiously

In their efforts to promote economic integration and harmonise trade and investment in their region, the 15 member states of the Economic Community of West African States (ECOWAS) on Saturday, June 29, 2019, agreed to replace their respective domestic currencies with a new one called ECO. The heads of state of these nations during their 55th Ordinary session in Abuja did not only agree on the single currency adoption, but also targeted January 2020 as its expected take-off time.

Nigeria, alongside 15 other states in the region are expected to surrender their respective currencies for the ECO and further agreed that in giving birth to it, its exchange rate should be determined by the market forces of demand and supply. Having a single regional currency no doubt if done properly could be catalyst in ensuring economic prosperity of the nations involved, especially if there is no any hidden motive enclosed therein.

If properly implemented, Nigeria no doubt could be its major beneficiary, being the strongest economy which also doubled as the most populous, constituting almost two-third of the region’s 380 million people. The need not to require foreign exchange before goods and services move freely among these countries will surely lubricate its economy.

While we may be in haste to join this league looking at the foreclosed benefits, it is equally important that we sit down and ponder on some critical issues. That most countries in the region, particularly the old French colonies are already using CFA as their currency, then suddenly came the announcement by the President of France, Emmanuel Macron, and his Ivorian counterpart, Alassane Ouattara, that their CFA will be renamed to ECO and will be used among the former French colonies. Of course, one needs to ask why France would be involved in the entire process. Is it a renewed attempt to further enlarge its colony to the entire region? Simply put, France by this move wants to go further to control the whole ECOWAS member states via the Eco-zone currency.

Let’s understand that these countries initially laid down some key conditions for all members joining the currency, including keeping budget deficit of all member states below 3% of GDP, making sure that gross external reserves worth at least three months of imports are kept, and that national debt must be kept below 70%. In the case of inflation rate, the countries agreed that inflation rate should not be more than 10%, while budget deficit should not exceed 10% of the previous year’s tax revenue.

Miraculously, without any of the countries able to meet these baseline conditions set by the West African Monetary Institute, we still believe its takeoff possibility in 2020. Therefore, Nigeria needs to tread with caution to avoid the repercussion of being plunged into serious economic crisis. If Nigeria is to surrender its Naira unconditionally, it would mean subjugating her economic independence to France. It means its economic policies will no longer be decided in Abuja, but Paris.

Also, given the fact that West African countries are dependent on commodities imports from the Euro-zone, prices of commodities will now be internationally regulated and externally controlled, which of course can only further subjects the ECO supply, interest rates, and exchange rates to be dependent on Euro.

France, as Professor Ibrahim Gambari, Nigeria’s former representative to the United Nations has kept saying, has always defined itself as the main power block in Africa and so, has always seen Nigeria’s self-definition as an African power as a threat to its interests. It is therefore surprising that Nigeria, which is the main target of this French action, is now attempting to surrender itself via its decision of abandoning Naira to adopt the French-dominated ECO.  

The fact that Nigeria has closed its land borders with its three Francophone neighbours for almost five months could be enough reason why they shouldn’t hesitate to use any opportunity at their disposal to deal with it decisively. Who knows if ECO may be one of those ways?

Though, following the France-led CFA using countries’ decision, Nigeria’s Minister of Finance Budget and National Planning, Zainab Ahmed, has said that Nigeria is studying the outcome and will act accordingly, I think the Nigeria should just boldly come out and tell ECOWAS that it is not ready to surrender its currency because there is no structure for the implementation yet on ground.

Nigerians are not ready to witness another economic recession. Any attempt to make Nigeria to sacrifice for others’ prosperity at its people’s detriment could only make its already bad condition even worse. If Britain will be battling for Brexit due to the European Union’s adverse effect on its economy, I see no reasonable justification for Nigeria’s move to abandon its Naira for ECO. It’s not too late to tell them the truth. It is better for us to be seen as enemies of regional integration than be a candle that will light the region and burn itself. A word is enough for the wise.

 Paki writes from PRNigeria Centre, Kano via [email protected]