The eco is the name for the proposed common currency of the Economic Community of West African States (ECOWAS). Plans originally called for the West African Monetary Zone (WAMZ) states to introduce the currency first, which would eventually be merged with the euro-pegged CFA franc which is used by the French-speaking West African region within the West African Economic and Monetary Union (UEMOA). This would also enable the UEMOA states to gain complete fiscal and monetary independence from France. The UEMOA states have alternatively proposed to reform the CFA franc into the eco first, which could then be extended to all ECOWAS states.
The eco has been pushed back several times since the launch of the ECOWAS single currency project, with the fifth launch deadline set for July 2027.
Ten criteria The West African Monetary Institute (WAMI) set out ten convergence criteria that must be met for the eco to be implemented. These criteria are divided into four primary and six secondary criteria. Up to the fiscal year 2011, only Ghana has been able to meet all the primary criteria in any single fiscal year.
The four primary criteria to be achieved by each member country are: A single-digit inflation rate at the end of each year. A fiscal deficit of no more than 4% of the GDP. A central bank deficit-financing of no more than 10% of the previous year's tax revenues. Gross external reserves that can give import cover for a minimum of three months.
The six secondary criteria to be achieved by each member country are: Prohibition of new domestic default payments and liquidation of existing ones. Tax revenue should be equal to or greater than 20 percent of the GDP. Wage bill to tax revenue equal to or less than 35 percent. Public investment to tax revenue equal to or greater than 20 percent. A stable real exchange rate. A positive real interest rate.
History of the currency
Before 2019 The first formal references to a regional monetary union date to the 1993 revision of the ECOWAS Treaty. Articles 3 and 51 to 55 state the objective of establishing a common currency at the regional level.
In April 2000, five English-speaking countries (The Gambia, Ghana, Liberia, Nigeria, and Sierra Leone) and Guinea, signed the "Accra Declaration", formally launching the West African Monetary Zone (WAMZ). They committed to create a second monetary zone in the region (alongside the West African Economic and Monetary Union) by 2003, setting convergence criteria and agreeing on a common action plan. The introduction of this second currency was repeatedly postponed first to 2005, then to 2010. At a meeting of the Convergence Council of Ministers and Governors of West Africa on 25 May 2009, it was rescheduled again to 2015 due to the 2008 financial crisis. This meeting also established a plan to begin work to merge the two West African currencies; this was planned to be achieved by 2020.
In 2001, the West African Monetary Institute (WAMI) was set up with headquarters in Accra, Ghana. It is to be an interim organisation in preparation for the future West African Central Bank. Its function and organisation are inspired by the European Monetary Institute. Thus, WAMI is to provide a framework for central banks in the WAMZ to start the integration and begin preliminary preparations for the printing and minting of the physical money, just as EMI did before in the Eurozone before the introduction of the euro. The current director general is Dr. Olorunsola E. Olowofeso.
Recent assessments of member countries' efforts to meet the criteria are very bleak. The performance scorecard presented at the 2012 Annual Statutory Meetings of the WAMZ shows that GDP growth was projected to decline to 6.9% in 2012 from 8.7% in 2011. The convergence scale of the whole WAMZ area was also projected to go down from a score of 79.2% in 2011 to 62.5% in 2012; as no member met all the convergence criteria. The average annual inflation rate also increased from 11.6% in 2011 to 12.6% in 2012. The Director of Multilateral Surveillance ECOWAS Commission, Lassane Kabore, described the performance as "dismal", but he also affirmed the commitment of his commission to the establishment of the Eco.
In 2014, the Central Bank of Nigeria published a document announcing the benefits of the single currency, emphasizing the creation of a vast common economic space to stimulate trade and investment.
In February 2018, ECOWAS affirmed its intention to restart the process with an introduction in 2020, which is strictly impossible: it is therefore a declaration of intent. On 23 February 2018, according to the economist , no serious work on the technical aspects of this implementation has yet been undertaken, either at the university level or at the state level.
2019 On 29 June 2019, the leaders of the Economic Community of West African States (ECOWAS) formally adopted the name "eco" for their project of the single currency. The currency was planned to be introduced in 2020.
ECOWAS leaders met in Abuja on 21 December 2019, six months after adopting the name "eco" for the future single currency project. This meeting came after the meeting of the committee of finance ministers and governors of central banks of the community space in the Nigerian capital.
Quoted by the Nigerian press agency NAN, the chair of the ministerial committee said that only Togo, among the ECOWAS countries, would meet the main requirements or criteria for the adoption of a single currency. These criteria include convergence, the flexible exchange rate regime, the fight against insecurity, and interstate collaboration.
On 21 December 2019, Ivorian President Alassane Ouattara announced that the West African CFA franc would be reformed, including renaming it the eco. France will no longer manage the currency, but the Banque de France will remain the guarantor of the convertibility between the eco and the euro with which it will keep a fixed parity. It was expected that its implementation would take place by the end of 2020.
On 22 December 2019, the managing director of the International Monetary Fund (IMF) welcomed the major reform of the CFA franc decided by eight West African countries and France. For Kristalina Georgieva, these changes "constitute a key step in the modernization of long-standing arrangements between the West African Economic and Monetary Union and France".
In December 2019, the President of Equatorial Guinea, Teodoro Obiang Nguema, visited Abidjan in Ivory Coast. During the press point after this meeting between the two heads of state, Alassane Ouattara and Teodoro Obiang Nguema, the two heads of state also discussed the reform of the West African CFA franc. The Equatorial Guinean president said he would like to see the same reform for the Central African CFA franc, which he deemed "obsolete".
On 29 December 2019, the president of Ghana expressed his desire to adopt the new eco to replace the West African CFA franc.
2020
In January 2020, according to several articles citing local media, Nigeria would require five "non-negotiable terms" before joining the single currency. Some particularly mention the deposits in the French Treasury of part of the foreign exchange reserves of the future common currency. On this point, the end of this guarantee is already mentioned in the reform proposed on 21 December. Still, according to the Nigerian press, Abuja would also require the management of the eco by the ECOWAS itself, without forgetting its impression in Africa and not in France.
Sierra Leone announced on Thursday 9 January 2020 it would decide on the future ECOWAS single currency, Eco, very soon. The Bank of Sierra Leone (BSL) announced on Thursday 9 January 2020 that the country will continue with Leone as its legal tender until the meeting of the Board of Governors of ECOWAS scheduled for 16 January 2020.
On 14 January 2020, the central banks of the ECOWAS sub-region began an extraordinary general assembly to deliberate on questions relating to the introduction of the single currency, the ECO, scheduled for 2020. The committee of central bank governors is also expected to discuss the implications of the recent announcement by French-speaking ECOWAS countries on the proposal to introduce the single currency eco to replace the CFA franc. The talks will also determine the way forward for the member states of the West African Monetary Zone (WAMZ) in accordance with the roadmap for the introduction of the single currency — the CEE. The ECOWAS technical team, however, is expected to present proposals made by the West African Monetary Institute regarding the CEE. The governors should also send their recommendations to the region's heads of state to find out if the region is ready for the introduction of the single currency.
On 16 January 2020, Nigeria and several West African countries, notably English-speaking ones, denounced in Abuja the decision to replace the CFA franc with the Eco, saying that it was "not in conformity" with the program recently adopted by the entire region to establish a single currency.
In all cases, the six countries of the West African Monetary Zone (WAMZ) "noted with concern the declaration aiming to unilaterally rename the CFA franc to eco by 2020", according to a press release issued after this extraordinary meeting between the various finance ministers and the governors of the central banks. WAMZ is made up of Nigeria, Ghana, Liberia, Sierra Leone, The Gambia and Guinea (Conakry), which is not part of the CFA zone. These countries consider that "this action is not in accordance with the decisions" of the Economic Community of West African States (ECOWAS) with a view to "adopting the eco as the name of the single currency" of the whole region.
They "reiterate the importance for all ECOWAS members to adhere to the decisions of the authority of the Heads of State and Government of ECOWAS concerning the implementation of the revised roadmap for the single currency program". A summit bringing together the heads of state of the WAMZ is planned "soon" to decide on the conduct to come, specifies the final communiqué.
Their 16 January statement also brought to light the battle for leadership between Côte d'Ivoire and Nigeria. In publicly criticizing the decision of the West African Economic and Monetary Union (Uemoa) to rename the CFA franc “eco” by 2020, the finance ministers and central bank governors of The Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone have not only revealed the divisions of ECOWAS.
On 31 January 2020, Ivorian President Alassane Ouattara clarified the alleged rejection of the eco by the 7 countries of the West African Monetary Zone (WAMZ). "There are only five countries that ended up in Abuja out of the fifteen of the Economic Community of West African States [ECOWAS]", he fumed, cutting the grass under his feet CFA anti-Francs, many of them shouting “white cap and white cap”.
"The majority of countries did not attend this meeting. It was not a meeting of heads of state, but of ministers and governors", said Ouattara. "What we decided at the level of heads of state, our will is to bring the eco in 2020", on the basis, he insists, of "conditions".
The first condition is to meet the 5 performance criteria: deficit of less than 3%, debt of less than 70%, low inflation, etc. (...). For the moment, there are only four or five countries, including Côte d'Ivoire, that meet these criteria", he added, stressing that the process should be "gradual". "Five, eight, ten countries [meeting the criteria] can come together", he said, adding that others could then join them like the eurozone started at eleven and which includes twenty countries today.
“We want to do it in stages. We do not want haste, but we also do not want countries that do not meet the convergence criteria to shake up the process", he concluded.