This article was first published in the February/March 2020 Africa edition of
Accounting and Business magazine.

Late last year the West African Economic and Monetary Union (UEMOA) announced that the CFA franc, the single-currency relic of the colonial era used by the union of eight mostly francophone nations, would be renamed the eco and subject to reforms. The move was welcomed as a loosening of France’s supervision of the single currency, but it also raises a host of questions, such as how the eco fits in with the plans for a common currency across the wider West African region.

Since 2003 the 15 members of the Economic Community of West African States (ECOWAS), which includes six mainly anglophone nations as well as the UEMOA members, have been working on establishing a common currency. Also expected to be called the eco, it is due to be adopted this July. The UEMOA move seems at odds with this initiative.

Reaction has been mixed. Ghana initially announced it would join the eco, while Nigeria said it was studying the situation. However, after a meeting of the West African Monetary Zone in mid-January, the six non-CFA West African nations condemned the UEMOA’s unilateral move, calling for a meeting of ECOWAS leaders to discuss the issue.

The decision to keep the new eco currency pegged to the euro, coupled with the announcement of the initiative by UEMOA head and Côte d’Ivoire president Alassane Ouattara alongside his French counterpart Emmanuel Macron, has led to accusations that France is hijacking the new currency: France will guarantee the eco, although participating nations will no longer have to hold half their reserves in France.

Most importantly of all, rushing to adopt the new currency without carrying other ECOWAS countries along with the initiative is a mistake that could endanger an eventual regional currency.

As much as anything, it is the timing that is at fault here. For a monetary union to be formed, all parties must agree and meet criteria for joining, and central institutions and legal frameworks must be set up. While the UEMOA group has some of these in place, the rest of region does not. UEMOA is simply out of step with its neighbours.

To ensure strong economic footings, the West African Monetary Institute has devised 10 criteria that ECOWAS nations must meet prior to joining a currency union for all West Africa, including a budget deficit of less than 3%, a single-digit inflation rate, external reserves enough to cover three months of imports, a stable exchange rate, and central bank deficit financing of no more than 10% of the previous year’s tax revenues. UEMOA member Togo is reported to be closest to meeting these criteria but most ECOWAS members – the anglophone nations in particular – still have much to do.

If UEMOA’s eco is to be a precursor to the proposed all-region currency, it has jumped the gun. There should be consultation and consensus on decisions on the structure of the new currency, and it should be truly West African, created by the region for the region – and devoid of external influence.

Okey Umeano FCCA is head of risk management at Nigeria’s Securities and Exchange Commission.