The crisis born from the future replacement of the CFA franc by the eco is not fatal. A resolution to the monetary impasse in ECOWAS is possible.
At the June 23 meeting of heads of state of the West African Monetary Zone (WAMZ), President Muhammadu Buhari of Nigeria expressed his deep disapproval at the creation of the eco, as a successor to the CFA franc from July 1, and advocated postponing deadlines. Positions close to those expressed also on the side of Conakry, in Guinea.
The conditions for a crisis within ECOWAS, between the countries using the future-ex CFA franc and their seven neighbors within the regional community, are therefore met.
In this controversy, Nigeria is right since Uemoa, by taking the name of the eco has shown a lack of respect compared to the other seven countries of ECOWAS and, in particular, towards Nigeria, which represents more than half of the population and around 70% of the GDP of the sub-region. In addition, the conditions for achieving this transition question the role and real ambitions of France in the sub-region.
But on the other hand, Abuja has not shown in recent years a real desire to move towards a single sub-regional currency. Nigeria, for example, has done nothing to develop a solidarity of foreign exchange reserves within the WAMZ.
The little progress of the continent’s first economy to support in the creation of the West African single currency is explained for various reasons. Nigeria has embarked – legitimately – on building a diversified national economy and is using its national currency, the naira, as an instrument for macroeconomic adjustment, notably to counter developments in oil revenues, in US dollars.
Thus, in the current context, the creation of a single sub-regional currency integrating Nigeria cannot be done within the framework of the convergence criteria adopted by ECOWAS. It will indeed take time for the country to diversify its economy and break out of the “oil price / currency parity” cycle.
The logical solution would be to go towards an eco / naira that is to say a currency whose exchange rate would vary according to the needs of the dominant economy of the sub-region, that of Nigeria, and therefore according the price of oil. This option is difficult to envisage, since most of the fourteen other countries of the region are not exporters of crude oil.
Sub-regional federalization in three phases
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Faced with this strategic impasse, another path must take shape, driven by a regional opinion which must be made aware of it: it is a sub-regional federalisation in three phases.
The first phase would consist in actually liberating the Uemoa from French supervision. This economic zone, which already has the merit of existing and of having a common central bank, can constitute a basis for federalization.
But the UEMOA and its central bank must become completely independent of France and establish with all the international partners the mechanisms necessary to secure international trade. The BCEAO, completely freed from the grip of France, will first have to conclude an agreement directly with the European Central Bank, then move, in a second step to a floating exchange rate.
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A Sahelo-Guinean Federation
In a second phase, a Sahelo-Guinean Federation will be built from an emancipated Uemoa and will bring together 14 West African countries with a coherent political and economic space which can count on an internal market of sufficient size to support true industrialization. This federation will have the new currency – the eco – which will benefit from the experience of an independent and renovated BCEAO. Each of the fourteen federal states will retain sovereignty over its natural resources, but the federal government will ensure that these resources are exploited and used for the benefit of the people of the Federation. It will also make democratic governance and respect for the rule of law prevail over the whole extent of the federation.
In the third phase, this Federation will launch with the Federal Republic of Nigeria a new dynamic for more effective regional integration as it involves two partners with less unbalanced economic and political weight. In the first instance, this could take the form of a confederation which would teach consensus and thus make it possible to go beyond the current institutional limits of ECOWAS.
The ultimate goal is to achieve a Federation of West African States (Fedeao), but it will take time for Nigeria to successfully diversify its economy and for the Sahelo-Guinean Federation builds the solid foundations of its industrialization, as Nigeria does, and in close partnership with it.
source: https: //www.jeuneafrique.com/1006835/economie/tribune-eco-franc-cfa-le-nigeria-a-raison-mais-le-federalisme-est-la-seule-solution/
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