The Ghana International Trade Finance Conference (GITFiC) in its monthly research has stated that the creation of a single currency is essential to the successful implementation of the African Continental Free Trade Area-AfCFTA.
According to GITFiC, although there are doubts due to the Euro crisis and the failure to establish the single currency in West African Monetary Zone (WAMZ) by the deadline, it is still timely and relevant. It established that with the introduction of the single currency, these nations will have the possibility to resolve their myriad monetary problems.
A monthly research carried out by GITFiC stated that the single currency is an opportunity for West African countries and Africa as a whole to pool their monetary resources together – a prerequisite for pursuing their individual and collective monetary goals in the current international context.
GITFiC noted that West African countries currently are faced with serious externally-created monetary problems that none of them could resolve on their own and where international monetary cooperation mechanisms perform insufficiently.
“Such is what is currently happening to the currencies of Member States, after a three-year Global Pandemic. In order to win the public’s full support and make policy decisions related to the adoption of the single currency that would unavoidably include lifestyle adjustments and adaptations on their side, it is crucial to broadly inform the populace of the project’s stakes.”
GITFiC
GITFiC averred that given the variety of monetary regimes in use in West Africa, the problem of exchange regime is not an easy one. “They range from the fixed exchange system in the WAEMU countries that is pegged to the Euro to the flexible regime in the WAMZ countries that normally uses the dollar as the reference currency”. It meanwhile, suggested that the prospects for the rest of the world’s political economy should also be given special consideration.
“The CFAF Franc, which is now tied to the Euro under agreements reached between countries using it and France, will be replaced by the West African single currency once it is delivered, along with all other currencies in use in this region of the continent. It goes without saying that economic factors, namely those concerning France, are of paramount importance.
“This issue also has to do with how the single currency for West Africa affects other countries. It is important to keep in mind that the adoption of a currency is essentially a sovereign decision in light of these external stakes. Therefore, the desire of member states and the backing of their populaces should come first in the formation of a common currency in West Africa.”
GITFiC
Expansion of Existing Monetary Unions
The research report noted that it might be possible to expand existing monetary unions in a limited way to provide strong incentives for current members to carefully consider the policies of prospective members. “Given the general absence of stable macroeconomic policies and fiscal restraint, it is crucial to use the goal of monetary union to promote stronger governance and more restraint”.
GITFiC noted that the development of ECOWAS’s regional integration has increased demand for a single currency and the level of regional integration had sparked a flood of opposing opinions regarding its impact and the exchange rate system on trade.
“On the one hand, WAMZ countries desire its adoption with a flexible exchange rate, whereas WAEMU nations desire its adoption with a fixed exchange rate linked to the euro. This divergence of views is the central point of our problem, particularly given that the Ghana International Trade and Finance Conference is aware of how adopting it will affect international trade. At least three important requirements must be met for the Eco (i.e. the Single Currency) to be successfully implemented.”
GITFiC
To achieve this, GITFiC said political commitment at the highest levels is essential. “In order to advance the goal of a single currency within a realistic time frame, it is necessary to establish strong political will that would motivate concrete reforms and policy frameworks”.
West African Economies Widen Their Focus
GITFiC called on West African economies to widen their focus to include regional industrial policy in addition to simply satisfying the convergence criteria.
“This is required to increase industrial production, which would serve as the foundation for intra-regional commerce, and lessen reliance on commodities windfalls that could cause ad hoc shocks to their economies. However, achieving this goal would necessitate close cooperation in the sub-industrial region’s strategy development as well as in the implementation of structural reforms that foster enabling environments, such as building cross-country infrastructure, modernizing institutions, removing non-tariff barriers, and establishing sound policy frameworks.”
GITFiC
GITFiC also called for a robust political union that would place Pan-Africanism at the forefront of the agenda to complement the monetary union, meaning the union should not be politically dominated by nations with larger economies, particularly Nigeria; rather, each nation should have a voice that is heard equally and work actively to advance the bloc.
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