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Nigeria leads 14 others in ECOWAS failure to meet 2020 single currency takeoff

Nigeria’s inability to meet set and agreed key economic indicators and structural adjustments ahead of the commencement of a single-currency regime for West Africa next year have been adduced as a major reason why 2020 is no more sacrosanct.

Whereas the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, was economical with words on why Nigeria failed to meet any of the listed terms and conditions, she confirmed that only Togo, out of the 16 ECOWAS countries had met all the convergence criteria.

Otherwise, Nigeria and 15 other ECOWAS economies aside Togo, are yet to meet the criteria for the monetary union.

Business Hilights recalls that there are three primary and three secondary criteria that a country must achieve to be included in the monetary union.

The primary criteria are a 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; and gross reserves that could finance at least three months of imports.

The secondary convergence criteria adopted by ECOWAS 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.

Currently, Nigeria’s budget deficit is far away from the 10 per cent mark even as annual inflation is still beyond the reach of the condition.

The Minister, who spoke at the opening session of a meeting of ECOWAS committee of ministers of finances and governors of central banks on the currency programme in Abuja weekend, recalled that “The idea of the single currency for the West African region was first mooted almost 30 years ago in the hope of boosting cross-border trade and economic development.

“Leaders of the 15 member states of the ECOWAS had formally agreed to name the common currency “Eco”.

Member countries that made up ECOWAS are Benin, Burkina Faso, Cape Verde, Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo.

Explaining more on the failure, Ahmed said the single currency would be based on a flexible exchange rate regime, with a monetary policy framework that would be focused on inflation, arguing that with only Togo meeting the criteria in the last two years; it would be difficult to operationalise the single-currency regime by next year.

The Minister, who averred that there was need for member states to pursue appropriate policies and structural reforms that would enable them to meet the convergence criteria, noted that “We need to address in an optimal way the challenges ahead of us. This meeting is important because we are at a crossroads. The recommendations we make will have significant implications on the monetary policies we undertake.”

However, she failed to give any timeframe when Nigeria will be able to meet the conditions.