Ghana says it is determined to join the "eco" monetary zone

By Stanislas NdayishimiyePosted on 30-12-2019Changed on 30-12-2019 at 23:33

Ghana announced this weekend its determination to do its utmost to join the “eco” monetary zone. A currency called to replace next year the CFA franc, considered one of the last survivals of "Françafrique". Interview.

Although it has its own currency, Ghana is ready to give up the cedi to join the eco zone as quickly as possible. Accra released the statement 8 days after the December 21 announcement in Abidjan of the end of the CFA franc.

The CFA franc , this currency common to the 8 member countries of UEMOA, the West African Economic and Monetary Union, will therefore give way to the eco, initially imagined to be the currency common to the 15 countries of the ECOWAS, the Economic Community of West African States.

Ghana could therefore be the first country outside the CFA zone to adopt the eco, which would make it the first economy in this monetary space before Côte d'Ivoire, while waiting for the Nigerian giant to renounce its currency, the naira.

But Accra has already warned: join the eco zone, yes, in order to remove trade and monetary barriers; but there is no question of letting the new currency keep a fixed parity with the euro for a long time. Ghana, moreover, urges the other ECOWAS member states that join the zone to quickly adopt a flexible exchange rate regime and to set up a federal central bank.

► Interview with Kako Nubukpo, former minister in Togo and current Dean of the Faculty of Economics and Management of Lomé.

RFI : Ghana has just applauded the eco currency at birth, which will replace the West African CFA franc as soon as possible. And he undertakes to do what is necessary to quickly reach the area. Does this mean that the birth of this ECOWAS currency will soon be a reality?

Kako Nubukpo: Ghana's decision is salutary, since this country has always advocated for the enlargement of the regional space. The announcement of its next entry into the eco zone, on the one hand, validates the process and more importantly, it shows that an English-speaking country which has absolutely not the same tradition of currency management as the countries of the franc zone will enter this common system. And I think this is something to salute.

While applauding the WAEMU decision to abandon the CFA to launch eco, Accra clarified that the fixed parity between eco and euro contained in the declaration of December 21 in Abidjan should give way to a flexible parity between the eco and a basket of currencies.

Ghana recalls the basic principle of the eco. It's that it will be a flexible currency. The fact for the Ivorian and French presidents to have announced on December 21, 2019 in Abidjan that the eco would be at a fixed exchange rate with the euro can only be a transitory situation likely to reassure economic operators. Because otherwise, we could have escaped from the CFA franc, the operators getting rid of the CFA to access the currencies and that would have precipitated the franc zone towards a devaluation. It was therefore to reassure economic operators that it was announced that there would be a fixed exchange rate. So that means that the transition period must be as short as possible, limited in my opinion to the period of replacement of CFA tickets by new eco tickets so that there is not too much suspicion or uncertainty on the eco currency exchange regime. So, for me, it is very clear that in the short term, we will have a fixed exchange rate with the euro, the time to make the transition: the establishment of the Central Bank, new notes and various banking commissions which regulate banking activity in the Cédéao area.

So it is a way of reassuring investors, as in 1994, politicians rather wanted to reassure consumers by declaring that the CFA franc was devalued by 50% when it was 100% ?

What is happening with the eco is something of a greater magnitude, since, at the same time as the question of the exchange rate regime, there is the question of the appropriate perimeter for the implementation of this currency. And so we have to answer two different questions at the same time: the first, which is purely technical, that of the exchange rate regime; and the second, much more political, which is the process of regional integration. What do we want together, how much, and what are we ready to agree in terms of solidarity so that space can function beyond money? Currency is necessary, but it is not the Alpha and Omega of the process of regional integration in West Africa.

It is the first country outside the franc zone to be expressed since the declaration of December 21 in Abidjan, but there is strong reluctance from the economic engine of the ECOWAS that is Nigeria.

What is happening with the eco is that the heads of state of the ECOWAS have noted that this currency will have a flexible exchange rate regime. This means that countries like Ghana and Nigeria, which are used to this exchange rate regime, will be the locomotives of the eco. The specific problem of Nigeria is that it is never in the same phase of the economic cycle as the other countries of the ECOWAS, because it is an oil exporter, while the others are rather oil importers. What makes that there is always this reluctance compared to the optimality of the future monetary policy of the Cédéao space. And then there is a second thing that makes Nigeria often reluctant, is that it realizes that it will have to be the lender of last resort for the eco, since its GDP still represents 70% of that of the Cédéao, with a population which is half of this sub-region. And so, it is not always certain that Nigeria is ready to play this role of lender of last resort, with what that implies in terms of budgetary solidarity and the transfer of resources to smaller economies.

A few days ago, the Nigerian Minister of Finance said that the announced deadline for the birth of the eco in 2020 would not be met, because all the convergence criteria are practically met by only one of the 15 member countries of ECOWAS : Togo. What is your comment ?

There is in fact a disparate situation with regard to compliance with the convergence criteria. The WAEMU countries are ultimately the closest to the criteria, since there is essentially one criterion that they do not meet, that of the budget deficit in relation to GDP, which should not be greater than 3%. Today we are around 6% in general, except indeed Togo which is below 3%. On the other hand there are other criteria that the other countries respect, for example Nigeria which respects the criterion of the debt since, with a ratio of the debt compared to the GDP around 20%, Nigeria is the least country indebted from the Cédéao area. But if we look at a country like Cape Verde, it is already in a fixed exchange rate with the euro without an institutional agreement with France and it has a very low inflation rate, even lower than that of the countries of the UEMOA. On the other hand, Cape Verde's largest debt in the ECOWAS: it is 120% of GDP. So that means that there is a general effort to be made to meet the criteria. Afterwards, we can consider the criteria also as a horizon and not as a prerequisite for adopting the eco. But that supposes a real political will of all the states of the ECOWAS to move towards this common currency: the eco.

On the same subject

Equatorial Guinea: President Obiang in favor of the reform of the CFA franc

Does the CFA franc want to survive by the eco?

Nigeria's caution regarding the eco

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