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West African Economic and Monetary Union (WAEMU): All You Need To Know About The Common Currency, Launching In 2020!

It was planned in 2015, then postponed to 2020. And it will not be until 2030 at worst! The project to create a currency common to the 15 member countries of the Economic Community of West African States (ECOWAS) has evolved into a long obstacle course.

The subregion is currently broken down into two monetary zones. On the one hand, eight member countries of the West African Economic and Monetary Union (WAEMU), which share the CFA franc and 7 states, including Nigeria, Ghana, Liberia, Sierra Leone , Each with its national currency. To demonstrate its willingness to move towards real regional integration, ECOWAS has set criteria for convergence between the two monetary zones. Since then, the horizon of this objective has not ceased to be rejected.  An economy is convergent when there is a fiscal policy coordinated both with a monetary policy and a policy of indebtedness, which is not yet the case for our States, ” explained Marcel de Souza, president Of the ECOWAS Commission, following a meeting in Niamey with the Nigerian President Mahamadou Issoufou, Coordinator of subregional monetary cooperation.

Troubled development

In reality, the current economic context does not lend itself to real progress towards the objective of the single currency of ECOWAS.Indeed, Nigeria, which alone accounts for 40% of the economic weight of the subregion, entered into recession in 2016, due to the fall of the price of a barrel of oil. A sign of the country’s real difficulties, the rate of inflation has risen to 18% between 2016 and 2017.

The economic situation is not much better in Ghana, another economic heavyweight of ECOWAS. Faced with the drastic fall in the price of cocoa, the country registered inflation of around 15% in 2016.

Although they are comparatively better, the eight WAEMU countries (Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Togo and Senegal) account for only 10% of GDP ) Sub-regional level. A weight notoriously insufficient to accelerate the advent of the single currency. But, even assuming that the sub-regional economic situation will become more favorable in the next few years, the single currency project will encounter a major political obstacle.

France at the controls

It is no secret that more than fifty years after independence, the monetary policy of the fifteen countries of the franc zone (8 in West Africa and 6 in Central Africa) is still managed by France. Thus, every six months, the French Minister of Economy and Finance meets, once in Paris and next time in Africa, his counterparts from the 14 countries of the franc zone to “make a point of step”.

In reality, it is Paris that decides, the African countries undergo. This was proved in January 1994 when the government of Edouard Balladur, then Prime Minister of France, had decided to devalue the CFA franc by 50% against the advice of African countries. Paris had even remained inflexible to the entreaties of the Gabonese Omar Bongo Ondimba, emblematic figure of the Françafrique.

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Another sign confirms that nothing in this zone can be done without the express agreement of France. Against the advice of Africans, it has been decided since the devaluation in 1994 that the West African CFA franc can not be freely spent in Central Africa and vice versa. The consequence is catastrophic for intra-African trade. For example, Chad uses the CFA franc of Central Africa while the neighboring Niger uses the CFA franc of West Africa. The nationals of these two countries need to pass through another currency in order to carry out commercial transactions. Obviously, the eight member countries of the UEMOA will turn to France when the day comes when it will be necessary to switch to the common currency.

300 million consumers

For West Africa, the advent of a single currency is not only an economic issue but rather a development issue. It would even be an economic turning point. At the very least, it is a real accelerator of subregional economic exchanges, which currently represent only about 19%, compared with about 25% in the Common Market for Eastern and Southern Africa (COMESA) zone.

Thus currency is an obstacle in the exchanges between Nigeria and its Francophone neighbors. The sub-regional economic power uses the naira, while Benin, Cameroon, Niger and Chad, its French-speaking neighbors, have the CFA franc as their currency. Similarly, Ghana uses cedi, while its clients, Burkina Faso, Côte d’Ivoire and Togo, have the CFA franc as their motto.

With more than 300 million consumers, ECOWAS represents a vast common market that regional integration can strengthen. But, in addition to the common currency, the 15 countries must work to transform the structure of their economies to increase the volume of subregional economic exchanges.

Non-existent links

Nigeria’s first African producer of black gold, with nearly 2 million barrels a day, does not export its oil to the subregion, due to a lack of refineries to transform its crude oil. ECOWAS member countries are importing oil from Asia and Latin America even though they could have bought it from neighboring Nigeria.

Côte d’Ivoire and Ghana together account for nearly 70% of world cocoa production, a product that they can not export to the subregion in the form of chocolate or other finished products due to lack of processing. To this weak industrialization is added the lack of transnational road and rail infrastructure and air links. It is now easier to go from Niamey to Paris than to rally the Nigerien capital of Freetown, Liberia.Easier to go from London to Abuja than to come to Dakar, Senegal, from the Nigerian federal capital.

Since its establishment in 1975, ECOWAS has made significant progress in the area of ​​free movement of persons. It is now possible for a Malian to cross all the 15 member countries of the space with his only national identity card, without being required any visa. This represents a significant achievement and a significant step forward in comparison with the Economic Community of Central African States (ECCAS). On the other hand, economic integration is still patinating. The long and difficult quest for the single subregional currency is proof of this.

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Written by MT

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