The move to ensure that member states of the Economic Community of West African States (ECOWAS) adopt a common currency has suffered a major setback as none of the West African Monetary Zone (WAMZ) member states has met the four primary convergence criteria to make that happen.
Speaking at the 48th meeting of the Committee of Governors of the Central Banks of the Member States of WAMZ in Abuja, the Director General of the organisation, Dr. Olorunsola Olowofeso, explained that the assessment of member states’ performance reveals that as of the end of June 2023, all WAMZ member states failed to meet all the four primary convergence criteria.
The member states of WAMZ include Nigeria, Ghana, The Gambia, Guinea, Liberia and Sierra Leone.The goal of the group is to achieve full economic and monetary union of its six member states.
Olowofeso highlighted that the zone’s performance score declined to 29.2 per cent compared to 41.7 per cent during the same period in 2022.
He added: “The medium-term projections on macroeconomic convergence, as indicated by the multi-year national macroeconomic convergence and stability programmes of the member states, suggest that none of the WAMZ member states will meet all the four primary convergence criteria on a sustainable basis for the remaining three consecutive years (2024-2026) of the convergence phase of the ECOWAS Single Currency Roadmap (2021-2027).”
Olowofeso stressed that the West African Monetary Institute (WAMI), an institution of the WAMZ, and one of the specialised agencies of the ECOWAS, would continue to leverage its existing relationships with partners to implement more digital innovations as Payments System Digitisation evolves.
He disclosed that regulatory and supervisory mechanisms, along with oversight frameworks, would be established in member states to respond to emerging challenges due to the influx of FinTech in the zone.
He further said the ongoing Unique Bank Identification and Digital Interoperability (UBI/DI) project in four countries of the WAMZ would further enhance the zone’s digital banking and financial inclusion strategy.
He, however, cautioned that the relevance of the initiatives and other efforts may be impeded if member states do not upgrade their payment systems infrastructure.
On his part, Nigerian Minister of Finance and Coordinating Minister for the Economy, Wale Edun, who assumed the mantle of leadership as the new chair of the WAMZ convergence council at its 51st ordinary session, observed that the challenges of a monetary union appear quite daunting, but the previous leaderships realised the adverse consequences of inaction and thus steered the course.
Edun noted that the recent reviews indicated sluggish growth and fragile recovery, reflecting global developments, which would impact convergence within the region as the medium-term forecasts also point to dampened growth at least in the short to medium term.
Edun said disrupted planting activities, fuel subsidy removal, exchange rate depreciation and escalating logistic costs had substantially increased business operating expenses and impeded overall productivity.
He expressed worries that despite the potential to enhance local food and livestock production, Nigeria relies heavily on imported agricultural goods to fulfill growing domestic demands.
He maintained that this dependency on foreign goods, which can be ascribed to a combination of factors, including structural rigidities, has not only strained available foreign exchange reserves but also contributed to inflation via exchange rate pass-through.
While admitting that the present reforms in Nigeria were adversely affecting the country’s socio-economic and macroeconomic outcomes, resulting in weakened economic growth as the non-oil sector sustained the economy while the oil sector languished in recession, he noted that the government’s macroeconomic outlook for 2023 underscored that Nigeria’s growth trajectory minimally impacted the standard of living or socioeconomic indicators for most of the population.
“This underscored the need for reforms to foster inclusive economic growth and steer the economy towards a prosperous future. Achieving this objective necessitates a drive for significant economic transformation, strategically focused on fostering sustained long-term economic growth, catalysing job creation and reducing poverty. In this regard, the government is focused on the effective implementation of the National Development Plan (NDP) 2021-2025 and reforms in critical sectors of the economy,” he added.
