ECOWAS, modelled after the European Union (EU), has been advised to fast-track the process of a common currency, in order to speed up integration of the organisation, according to Stephen Karinge, Director of Regional Integration and Trade at the Economic Commission for Africa (ECA).
ECOWAS is a regional economic bloc, established in 1975 to accelerate socio-economic development among the then 16 member countries through the free movement of people, goods and services.
As part of measures to fasten economic integration, the organisation has been working towards a common currency known as ‘eco’ for the region — a move that will harmonise the CFA currency, common among the eight Francophone members, and the individual currencies of the other members.
Some analysts are of the opinion that ECOWAS needs to take a second look with its planned common currency.
However, others believed they should go ahead with the plan because of the benefits.
Karinge told PANA, in an exclusive interview, that for a functioning common currency regime to be achieved, there has to be a coordinated monetary and fiscal policy.
According to him, ”I think from the experience that we have seen from Europe, the reason they are having the crisis is because even though they have a coordinated monetary policy, you also need to have coordination of fiscal policy for you to have a functioning common currency.
Karinge said: “So for us, we have to ask ourselves the convergence criteria that we have in ECOWAS. Is it such that we will be able to stick to a fiscal policy that is actually coordinated? Do you really need to cede some level of sovereignty so that at least fiscal policy in Nigeria does not disrupt the functioning of the common currency.
“Because you actually need to have balances in your budget, fiscal balance in such a way that you don’t create problems for the others, because you are able to show that like in Greece we have the situation whereby there was fiscal balance in a negative very high way, so you have to get countries like Germany to come in to try to help in solving this fiscal mess.”
He said the various convergence criteria needed to be properly worked out, be it in budget balance and monetary policy.
In addition, the ECOWAS members need to think about what kind of fiscal policy coordination and fiscal policy pact that should be put in place in order to have a functioning common currency, Karinge said.
He also stressed the need for African countries to accelerate the realisation of the Continental Free Trade Area, stressing that this will be a step towards achieving a vibrant African Economic Community.
“The Regional Economic Communities (REC) are actually building blocks to the African economic community in which case the regional economic communities like ECOWAS, Common Market for Eastern and Southern Africa (COMESSA), East African Community (EAC), Southern African Development Community (SADC) and the Maghreb Union (UMA), must go through the stages of becoming full-fledged free trade areas so that when it comes to us realising our continental free trade area, most of the work would actually would have been done at regional levels,” Karinge added.
He said a combined fully functional Free Trade Areas of ECOWAS, COMESA , EAC and SADC, will bring down close to 85% to zero of trade that is taking place among the 41 countries that constitutes the four blocs.
“So when it comes to negotiating the continental free trade area, it will remain a very small percentage of the tariff lines to get down to zero, that is why the Regional Economic Communities (REC) are so important to realise the regional integrated market,” he explained.