Eco (currency)


The Eco is the proposed name for the common currency that the West African Monetary Zone plans to introduce in the framework of the Economic Community of West African States. After its introduction, the goal is to merge the new currency with the West African CFA franc. This will create a common currency for much of West Africa.

Ten criteria

For the Eco to be implemented, ten convergence criteria, set out by the West African Monetary Institute, must be met. 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:
The six secondary criteria to be achieved by each member country are:

Before 2019

The goal of a common currency, first in West African Monetary Institute /West African Monetary Zone countries–The Gambia, Ghana, Guinea-Conakry, Liberia, Nigeria and Sierra Leone–and later in the whole ECOWAS area, was officially stated in December 2000 in connection with the formal launch of WAMZ. The Eco was first planned to be introduced in 2003, but this was postponed several times, to 2005, 2010 and 2014. At a meeting of the Convergence Council of Ministers and Governors of West Africa on 25 May 2009, the start of the currency was rescheduled to 2015 due to the international economic crisis. The December 2009 meeting also established a plan to begin work to merge the Eco with the CFA franc immediately upon the launch of the Eco; this was planned to be achieved by 2020.
In 2001, the West African Monetary Institute 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 J.H. Tei Kitcher.
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 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 February 23, 2018, according to the economist Jean Joseph Boillot, 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

In June 2019, the major financiers of the 15 ECOWAS countries stressed the importance of strengthening the macroeconomic convergence of the 15 countries.
Respecting the timetable for the implementation of the single currency will depend on the "efforts" of each country in this area, said the president of the ECOWAS Commission, Jean-Claude Brou.
"Performance in terms of macroeconomic convergence is a sine qua non" for the single currency, insisted Adama Koné, adding that it was necessary "to strengthen the mechanisms of multilateral surveillance". A single currency "will bring a lot to our savings. This is an opportunity for integration that must be seized for African countries, because the markets are fragmented."
On June 29, 2019, the leaders of the Economic Community of West African States formally adopted the name of "eco" for their project of the single currency. The currency is planned to be introduced in 2020.
In October 2019, according to the International Monetary Fund, the success of the project to replace the CFA franc in West Africa with a common currency will depend on taking into account certain factors, both political and economic. It is also worried about the slowdown in growth south of the Sahara.
ECOWAS leaders met on December 21, 2019, in Abuja 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.
"The recommendations report is ready to be submitted to Heads of State," said Nigerian Minister of Finance, Budget and Planning, Zainab Ahmed, chair of the ministerial committee.
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 December 21, 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 is expected that its implementation will take place by the end of 2020.
On December 22, 2019, the Managing Director of the International Monetary Fund welcomed the major reform of the CFA franc decided by eight West African countries and France. For Kristalina Georgieva, these changes "constitute an essential step in the modernization of long-standing agreements between the West African Economic and Monetary Union and France".
On December 28, 2019, the President of Equatorial Guinea, Teodoro Obiang Nguema, visited Abidjan in Côte d'Ivoire. 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 would like to see the same reform for the Central African CFA franc, which he deems "obsolete".
On December 29, 2019, the president of Ghana expressed his desire to adopt the new eco which is being established 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 December 21. 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, January 9, 2020, to announce its decision on the future ECOWAS single currency, Eco, very soon. The Bank of Sierra Leone announced on Thursday January 9, 2020 that the country will continue with Leone as its legal tender until the meeting of the Board of Governors of ECOWAS scheduled for January 16, 2020.
On January 14, 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 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 January 16, 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 "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, 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 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 January 16 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 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 January 31, 2020, Ivorian President Alassane Ouattara clarified the alleged rejection of the Eco by the 7 countries of the West African Monetary Zone. "There are only five countries that ended up in Abuja out of the fifteen of the Economic Community of West African States ", 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 can come together," he said, adding that others could then join them like the eurozone started at eleven and which includes ten nine 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.
In February 2020, the Nigerian foreign minister revealed that the meeting attended by President Muhammadu Buhari and chaired by the President of ECOWAS, President Mahamadou Issoufou of Niger, also discussed the new single currency of West Africa, the CEE.
On this specific point, Minister Onyeama announced that "Nothing has changed with regard to the position of Nigeria". He explained that according to Nigeria, the convergence criteria are not met by the majority of countries and that it is therefore necessary to extend the deadline for the launch of the ECOWAS single currency.
In February 2020, an extraordinary summit of the Economic Community of West African States took place. Many points were raised. In particular the establishment of the single currency,
On the single currency, the final communiqué which sanctioned this meeting mentions that the Conference of Heads of State and Government of the subregional organization is satisfied with the important developments initiated by the West African Economic and Monetary Union in the creation of the single currency. "The Conference was informed by Alassane Ouattara, President of the Republic of Côte d'Ivoire, President of the Conference of Heads of State of Uemoa on the reform of the CFA franc. This reform is a step towards achieving the establishment of the Eco as provided for in the road map adopted by the Conference of Heads of State of ECOWAS. The Conference expressed satisfaction with these important developments and the insights provided by the president of the Conference of Heads of State of Uemoa on this issue," read the press release.
On 17 February 2020, the West African Economic and Monetary Union was published and its planned extension to the entire Economic Community of African States. Entitled Entry into the Era of Eco: Implications of Reform in West Africa, it aims to address the uncertainties arisen from the announcement of this substitution by Presidents Ouattara and Macron on 21 December 2019.
The first conclusion is that the parity maintained with the euro and France's unlimited guarantee of convertibility will maintain confidence in the new currency. This guarantee helped to contain inflation from 2000 to 2019 at an average of 2% in the Uemoa region, compared with almost 10% in Cedeao and about 16% in sub-Saharan Africa.
"No immediate effect" on the sovereign rating of the states, The end of the deposit of half of the exchange reserves of the Member States of the Union with the French Treasury does not worry S-P, because the fixed exchange rate is maintained. "That is why we believe that this reform should not have an immediate effect on our sovereign ratings," the authors conclude. In other words, investors don't have to worry at the moment.
The second conclusion is that the project to extend the eco to the fifteen members of the Cedeao seems a long way off. "Material barriers remain, which leads us to consider this project unlikely in the medium term," the report says.
Firstly because of Nigeria's weight, because Nigeria accounts for two-thirds of Cedeao's GDP and three times more than Uemoa's. But also because of its protectionist policies, says the report: "Accepting a common monetary policy between Nigeria and its Cedeao partners therefore seems difficult, especially since Nigeria has recently decided to close its borders with Benin and Niger to reduce smuggling and support local agricultural production.
An extension beyond France's Uemoa guarantee would also require the approval of the Council of the European Union after consultation with the European Central Bank, which is not automatic.
Finally, the adoption of a flexible exchange rate regime desired by Cedeao would increase the significant risks in terms of monetary shocks for Uemoa economies, particularly those that have increased their use of foreign currency borrowing in recent years. Years. years," says S-P, recalling the conclusion of one of its 2017 reports on the dangers of devaluation: in the event of a currency crisis and without the French guarantee, Côte d'Ivoire, Senegal and Togo, which borrowed heavily, especially in form Eurobonds, see their debt heavily set up and S-P would be forced to lower their ratings.
The report concludes with the recommendation to sharply improve tax revenues and a warning: "Whatever exchange rate regime Uemoa members choose, whether it is the maintenance of the euro, the option of a basket of currency or a floating rate of exchange rate, fiscal discipline and strong economic policy will be all the more important for the economic stability of the monetary union.
On 20 May 2020, the Council of Ministers of the French Republic adopted a bill according to which the Central Bank of West African States, the central bank managing the currency of the eight nations of the West African Economic and Monetary Union which use the West African CFA franc, will no longer be required to deposit half of its exchange reserves with the Public Treasury of France. Furthermore, the French government will withdraw from all governing bodies of the Central Bank of West African States; until now, both the Minister of Finance of France and the governor of the Bank of France participated in the biannual meetings of the Central Bank, one of which took place in Paris. Both houses of the French legislature, the National Assembly and the Senate, must approve the bill for its provisions to come into force. Subsequent to ratification, the eco is expected to come into use in July 2020. It remains for the nations who have proposed to adopt the single currency, whether to continue using the name ‘eco.’ France will guarantee a fixed exchange rate of 1 euro to 655.96 West African CFA francs, though this arrangement is likely to change after the introduction of the new currency.
The second step towards the disappearance of the CFA franc and its replacement by a single currency called Eco, the French Parliament should adopt before the end of the third quarter the bill initialed on May 20, 2020 in the Council of Ministers and intended to ratify the agreement of monetary cooperation concluded in Abidjan on December 21, 2019 with the governments of the member states of the West African Monetary Union.
Given that a law on the reform of the Eco only passes to the French parliament until the end of September 2020, the agreement to adopt the Eco does not risk doing this before October 2020.