Eighteen months to the September 2020 deadline to attain the proposed monetary integration and single currency project of the ECOWAS region, none of the member states could achieve all the led down convergence criteria required for the programme to take off.
This now casts doubts on the possibility of establishing a Monetary Union (MU) and adopting the single currency – proposed as the Eco – by the 2020 date which member states insist is sacrosanct.
Ngozi Egbuna, Director General of the West Africa Monetary Institute (WAMI) who gave an update report on the project in Abuja on Thursday said only three of the ECOWAS countries have made remarkable progress, meeting three out of the four convergence criteria.
She was speaking at the 37th meeting of the committee of governors of the central banks of member states of the West African Monetary Zone (WAMZ) being hosted by the Godwin Emefile led Central Bank of Nigeria (CBN).
The Forum of Finance Ministers of WAMZ
In November 2002 WAMZ decided to facilitate the harmonization of fiscal and monetary policies by introducing two sets of convergence criteria to drive the establishment of the MU and adoption of the Eco.
But to achieve a common Monetary integration programme required member-countries to comply with a set of primary and secondary convergence criteria to ensure a stable macroeconomic environment.
Under this programme, there are four primary criteria and six secondary criteria, the satisfaction of which is a necessary condition for a successful monetary union.
The primary criteria include: budget deficit/GDP ratio (excluding grants) of less or equal to 4 per cent, inflation rate of less or equal to 5 per cent; Central Bank Financing of Budget Deficit of less or equal to 10 per cent of previous year’s Tax Revenue; as well as Gross External Reserves of greater than or equal to 6 months of imports cover.
The secondary criteria include prohibition of new arrears and liquidation of all outstanding ones; tax receipts/GDP ratio of greater or equal to 20 per cent; salary mass/total tax receipts ratio of greater or equal to 35 per cent; public investments financed from internal resources/tax receipts ratio of greater or equal to 20 per cent;; positive real interest rates; and real exchange rate stability.
Speaking at the meeting, Egbuna said the assessment of member states performance on the primary convergence criteria show that none of the countries met all the four criteria.
However, the average performance of the zone improved during the year under review.
She said The Gambia, Guinea, Nigeria attained three criteria each. The Gambia missed the fiscal deficit criterion, Guinea slipped on the gross eternal external criterion while Nigeria missed the inflation criterion.
Ghana and Liberia achieved two criteria each, Ghana missed inflation and fiscal deficit criteria while Liberia missed inflation and Central Bank financing criteria.
Sierra Leone met one criterion- the gross external reserves.
Raising concerns on the inability of member states to meet those convergence target many years after, CBN governor Emefilele told the gathering that Nigeria was still committed to the sub-regional economic integration programme, but will progress with caution.
“For us to achieve a sustainable economic monetary integration programme, there is need for all of us to follow meticulously the programmes that we set for ourselves as individual counties to ensure that we are really ready for this union,” Emefile stated.
He acknowledged the gains of proposed monetary union programme, but united Nigeria needs to proceed with a lot of caution to move in the right direction.
“The fact that our heads of government have insisted that 2020 remains sacrosanct also means that a lot of work must be done to ensure that as we embark on this journey, it will be sustainable,” he stated.
Source: Business Day, Nigeria