The ECOWAS Head of State
and Government last week, adopted ECO as the name of the single currency to be
used for business and trading in West Africa starting from January 2020. This
is a step in the right direction when viewed from the perspective on
international trade. This is because, one of the major factors contributing to
the low trade volume in the region is the issue of remittance and payment of
the proceeds of the export done which has to be in foreign currencies like the
US Dollar.
With this new
development, eight of the ECOWAS
countries which include Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali,
Niger, Senegal, and Togo who currently jointly use the CFA franc will now switch
to ECO while the other seven countries which include Nigeria, Liberia, Mauritania,
Gambia, Guinea, Sierra Leone and Ghana will be changing their various different
currencies to ECO. The different currencies used in the region has been a
hinderance to trade because whenever trade
is being done, the sellers tend to find it difficult to source dollar to make
the necessary payment. This has strongly reduced the progress of the trade in
west Africa and has led to increase in informal trade within the region which
has also motivated the rise in the number of informal currency exchange who
will collect CFA from an importer in Togo and pay NGN to an exporter
in Nigeria.
The decision of the west
African government to adopt a single currency for trade in west Africa will
surely contribute to the reduction of informal trade and increase the possibility
of capturing most of the trade transactions being done in the region. It will
also increase the business opportunities among countries in the region via likely
renewed interest of trading companies to do business within the region as a
result of the ease of remittance. This likely increase in demand from the
region could therefore lead to increase in the volume of production of
businesses in the region and hence increase job opportunities, increased profitability
and of course increase in wealth and Gross Domestic Products of countries in
the region.
There is no doubt that
adopting a single currency will contribute to the growth and development of the
region if it is well implemented. A case in point is that of the European union
who adopted euro as a single currency, and this has contributed significantly
to the growth of trade among the member countries in the region. With a
population of about 500 million, the EU is contributing about 30% of world
trade and more than 60% of these trade take among the EU member countries.
Even though, the
introduction of single currency comes with great benefits, several economists
have expressed concern about the lack of integration policies among member
countries in the region. According to them, a single currency will only
work if all the countries involved are economically aligned and this is
currently not the case in the ECOWAS region. This is why the
implementation of this economic policy is very germane for the region to enjoy
the benefits
Finally, the decision of
the Nigerian president to sign the AfCFTA and the adoption of ECO as a single
currency in west Africa are strong indications that ECOWAS and indeed Africa
are in the right direction to begin to grow their trade volume from the abysmal
low level of less than 3% and begin to favorably compete with other trade blocs
around the world.
Bamidele Ayemibo/bayemibo@3timpex.com
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