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A senior IMF official has warned West African nations against relying on political sentiment as the sole driver of plans for monetary union in the region.
West African leaders can successfully set up a single currency if they muster the political will, but disparities between the member countries can undermine such a union, said W. Scott Rogers, the Nigeria Country Representative of the International Monetary Fund.
The degree of differences in national financial systems and response to specific shocks in individual countries are critical factors to be considered, Rogers told West African journalists attending a Thomson Reuters Foundation Financial and Economic Journalists course in Lagos on Wednesday.
The idea of a common currency by 2015 was initiated by the West African Monetary Zone, comprising six countries within the ECOWAS, in 2000 to promote economic integration and trade in the sub-region.
But the West African states planning to adopt the Eco currency have largely failed to meet self-set primary criteria of a single digit inflation rate and reduction in budget deficit for the introduction of the currency, as the overall compliance with macroeconomic convergence criteria deteriorated.
Last year, five of the six countries - Nigeria, Ghana, Sierra Leone, Guinea and the Gambia – all failed to meet the criteria because they suffered weak fiscal performance and weak currencies. Only Liberia met the goals.
“If West African nations want to have a single currency, they can have a single currency, nothing stops them. It’s a question of how high priorities are for these member countries,” Mr. Rogers said.
The WAMZ is largely dominated by Nigeria, which controls over 80 percent of the GDP in ECOWAS, due to its status as Africa's largest oil producer.
Sanusi Lamido Sanusi, Governor of the Central Bank of Nigeria and Chairman of the Committee of Governors of Central Banks of the WAMZ, recently said that most member countries are on course in meeting the convergence criteria target date of 2015.
The West African Monetary Institute based in Accra, Ghana is developing the new currency with the eventual goal of merging the Eco with the CFA franc, to give all of West and Central Africa a single and stable currency.
Analysts are however skeptical if the francophone bloc of Ecowas already belonging to the CFA currency, which is practically convertible to the Euro, would be interested in joining the Eco.
Story by Kofi Adu Domfeh/Luv Fm/Ghana
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