Once again, countries of the West Africa Sub-region have failed to meet all the convergence criteria for a common currency and unified monetary zone.
However, the Governor of the Central Bank of Nigeria (CBN) Mr. Godwin Emefiele has cautioned member countries of the sub-region not to let the desire for a common currency and economic prosperity for their people blind them to the adverse and contagion factors associated with a unified monetary area and common currency.
Speaking at the 37th Meeting of the Committee of Governors of Central Banks of the West African Monetary Zone in Abuja Thursday, Emefiele cautioned that “our desire for greater economic prosperity for our people through a common monetary union must not vitiate our awareness of the potential adverse and contagion factors associated with unified monetary area and common currency.”
Specifically, Emefiele noted that “the unfolding trade war between the United States, China and the West portends both opportunities and challenges for our region’s economy, depending on how we approach it individually as nations. Nonetheless, while the shocks to individual economies might vary in magnitude and intensity, it might yet be an opportunity for us to look inward and strategize on how best to fill the trade gap that would ensue.”
Going forward, Nigeria’s Central Bank Governor advocated that “now is the time to create the West African Monetary Zone (WAMZ) Commission to drive our common interests and aspirations. We must intensify our level of cooperation and collaboration through strong bonds to work as a unit within the ECOWAS monetary union programme to achieve our shared objective.”
Emefiele stated that “it has become imperative for us to bring this collective resolve to bear as we embark on a thorough review of the economic conditions of member countries vis-a-vis their levels of preparedness for the monetary union and economic integration of the sub-region.”
For this reason, the report of the 33rd Meeting of Joint Technical Committee that is scheduled to be submitted in course of the WAMZ meetings he said “should be meticulously and objectively studied for the purpose of gaining more clarity on the level of preparedness of member countries for regional integration.”
In addition, he said “the discussion should identify existing or potential impediments to the realization of the deadline for the commencement of the currency union. This is imperative in order for us to jointly find viable options in accelerating progress towards achieving the integration objective.”
Emefiele added that he is of the conviction that “deeper integration of our different economies and harmonization of our currencies, amongst others, will help in stabilizing our economies by accelerating investment and trade in the sub-region; minimize transaction costs and bring about quality employment opportunities with improved standard of living for our people.”
For these reasons he called on every WAMZ member country “to continue to work towards reversing the structural and institutional deficiencies that have continued to stalemate this unification process by working hand-in-hand with our various fiscal authorities in narrowing budget deficits, suboptimal fiscal performance, and encouraging investments in infrastructure amongst others.”
This meeting he admonished should serve as a veritable opportunity for member countries to “review our progress and come up with workable strategies aimed at accomplishing our common objective.”
He added that “while we focus on the uniform achievement of the convergence criteria, we also must not lose sight of the importance of sustainable real convergence in the sub-region. This, in effect, is to ensure the attainment of optimal mix between the sustainability of monetary cooperation and the conditionality attached to the attainment of the macroeconomic convergence criteria.”
In her presentation of the summary of the progress report on the implementation of the West African Monetary Institute (WAMI) work programme, the Director General of WAMI Dr. Mrs Ngozi Egbuna disclosed that as at December, 2017, the assessment of member states’ performance on the primary convergence criteria showed that none of the countries met all the four criteria.
However, the average performance of the member countries of the zone improved during the year under review.
According to her, The Gambia, Guinea and Nigeria attained three criteria each. The Gambia missed the fiscal deficit criterion, Guinea slipped on the gross external reserve and Nigeria missed inflation criteria. Ghana and Liberia achieved two criteria each. Ghana missed the inflation and fiscal deficit criteria, while Liberia missed inflation and Central bank financing criteria. Sierra Leone met one criterion, the gross external reserve.
In an attempt to initiate the development of the bond market in The Gambia, Guinea, Liberia and Sierra Leone, WAMI intends to seek funding from development partners to i) deepen primary markets and short term instruments, ii) develop secondary markets and long term instruments, and iii) improve debt market regulatory systems and broaden the investor base.
With regards to financial market integration, Ngozi Egbuna noted that significant progress had been realized including the following: Having successfully implemented the phase l(Sponsored Access) programmes of the capital market integration, with the successful execution of transactions between CAL Brokers (Ghana) and United Capital Securities (Nigeria) for various quoted securities, activities on cross border trading has remained sluggish due to low level sensitization and difficulties in cross border settlement.
The African Development Bank (AfDB) funded WAMZ payments system development project she said “continued to have significant impact in beneficiary countries. The transition from hitherto cumbersome payment and clearing to a more rapid and convenient system, has improved the payment landscape and served as a spring board for new innovations in these countries.”
Subsequently, in line with the directive of the convergence council, WAMI, convened a meeting to revive the Zonal Payment System Committee. The Committee developed a terms of reference that encapsulated a wide range of issues relating to the development of payment system in the Zone and a specific mandate to foster coordination and integration of payments and settlements in the Zone.