The 17 June meeting of 15 of the Economic Community of West African States’ (ECOWAS) finance ministers and central bank governors in Abidjan reaffirmed their goal of launching a single currency in 2020. The project, the ultimate goal of regional integration, has been under discussion since the multilateral organisation was launched in 1975.
The new unnamed currency would replace the CFA franc and seven other national currencies. This latest meeting was a turning point because of the accelerated, albeit ambitious, target date of 2020.
Achieving this will not be easy. Many obstacles to the free movement of goods, capital and persons within ECOWAS remain to be resolved. The choice of exchange rate regime central bank model will need to be decided at the next heads of state summit in Abuja on 29 June. However, the political will now seems to be there.
The CFA franc, now increasingly seen as a symbol of French neo-colonialism, has long been viewed as an impediment to regional economic integration.
While several financial experts do not believe that a real single currency is achievable in the short term, they think that a common bargaining chip for companies and institutions — on the model of the European Currency Unit (ECU) which preceded the Euro — is conceivable.
In many ways, introducing a single currency in West Africa is more complicated than in Europe.
One major reason is the huge demographic and economic dominance of Nigeria, Africa’s largest economy (in GDP terms), which comprises 196 million of the region’s 340 million inhabitants and accounted for 55% of ECOWAS’ total GDP at the end of 2018.
A second reason is the low volume of trade between the countries. That, however, is partially a direct function of the effective non-convertibility between the CFA franc and the region’s other currencies. In that context, the CFA franc can be seen as an impediment to the region’s economic and financial integration and its economic growth.
This excerpt is taken from Sahara Focus, our monthly intelligence report on the Sahel region. Click here if you would like to receive a free sample.