In 2003, shortly after the launch of the euro, leaders of the fifteen-member Economic Community of West African States (ECOWAS) proposed that the region also had its single currency – the eco. Seven currencies are currently in use in West Africa, with eight Francophone countries using CFA francs. The other countries own individual currencies, none of which is freely convertible. Among other potential benefits, the proposed eco should reduce barriers to trade across the region and improve lives in general. But since then, ECOWAS has postponed the launch of this currency four times: in 2005, 2010, 2014, and 2020. Now it has set the launch date for 2027. So, for now, West Africa’s eco is still a pipe dream.

Castles in the air?

The idea of a single currency has met several clashing reactions, both from the public and from industry experts. But amidst all of this, the eco’s feasibility is a key concern. Why is that?

Implementing the eco needs member countries to meet a few criteria, most of which are unlikely to happen. They must have:

1. A single-digit inflation rate at the end of each year.

2. A fiscal deficit of no more than 4 per cent of GDP.

3. Central-bank deficit-financing of no more than 10 per cent of the previous year’s tax revenues.

4. Gross external reserves that can give import cover for a minimum of three months.

Most of the 15 countries are unlikely to achieve all of the above criteria in years. Only Cape Verde, Liberia, Ghana, and Togo have met some of them, but not consistently. Notably, the European Union used a similar method to launch the euro. But copying their model for a region with entirely different realities is simply building castles in the air. The EU could set those standards because they were strategically achievable in their climes. But the ECOWAS’ ambition, which it has refused to be flexible with, is technically based on hopes that economies will improve. Besides, discussions around the euro go as far back as the 1960s, but it wasn’t until 1999 that the currency finally launched. And even then, only 11 countries adopted it. Now, that number is 19; despite being in existence for 20 years, not all 27 countries in the EU are yet to fully adopt it. The problem, however, is that West Africa may not have as much luxury of time as the EU did because the world is evolving faster than ever.

Africa’s future of money

It’s been 31 years since the African Union conceived the idea of a single currency for Africa. Some progress—or maybe too little—has been made concerning this, with the setup of the Pan-African Payment and Settlement System (PAPSS), which makes it easy to exchange multiple African currencies. Today, PAPSS is still in the pilot phase in 6 countries. This single currency, along with the AfCFTA, is part of the AU’s plans to transform Africa into a European-style economy one day. But it appears African countries are gradually moving past that ambition.

In October 2021, Nigeria launched its Central Bank Digital Currency (CBDC), the e-Naira, through a partnership with Bitt Inc. It made this move shortly after Ghana partnered with a German firm, Giesecke+Devrient for its e-cedi pilot. Other African countries: Kenya, South Africa, Rwanda and Tanzania are also researching to launch their digital currencies. Creating digital currencies implies that these nations are looking for ways to give their currencies more utility. Nigeria and Ghana claim they want to use these blockchain-based currencies to boost financial inclusion.

Nigeria is crucial to the creation of the eco. Not only because it is the region’s biggest country, but also because it is the only country in West Africa with a banknote printer and mint. So the Nigerian Security Printing and Minting Company Limited is ECOWAS’s most viable option to mint the eco, except it finds an alternative.

Nigeria has expended massive resources into the development of the e-Naira. However, its adoption has been slow. This action casts doubts over the possibility of West Africa ever having a single currency. One reason is that it would be difficult for these nations to abandon their currencies which are now going digital, after so much investment. The other is that if the e-naira and e-cedi succeed, other countries in the region would likely follow suit. 

CBDCs can ease cross-border payments, but only if they are built with interoperability in mind. A paper on cross-border CBDCs, published by the Bank for International Settlements (BIS), in conjunction with the International Monetary Fund (IMF) and World Bank, urged collaboration among countries in designing CBDCs to enable cross-border payments. Outside Africa, Some counties have ongoing collaborations for cross-border CBDCs—Project Jasper–Ubin, between Canada and Singapore in 2019; Project Jura, the recent trial between France and Switzerland; Project Inthanon–LionRock, between Thailand and Hong Kong; Project mCBDC Bridge, between Thailand, Hong Kong, China and the UAE; and Project Aber, between the United Arab Emirates (UAE) and Saudi Arabia. The same can happen in Africa, making a single currency unnecessary. Furthermore, tech companies are already building solutions to make CBDCs work at scale. For instance, Visa developed a new concept called the “Universal Payment Channel” (UPC). With the UPC, people can send stablecoins like the USDC to a Nigerian or Ghanaian, and they get their money in e-Naira and e-cedi, respectively.

Besides, there is the option of cryptocurrencies, which Africans already use for cross-border transactions. Their decentralised nature makes them easily bypass the hassle that comes with transacting across over 40 different currencies and their corresponding diverse financial systems. Although many African governments do not support cryptocurrencies, it is almost impossible to promote CBDCs without spreading awareness about cryptos since CBDCs are essentially government-owned versions of cryptocurrencies.

Does West Africa need a single currency?

The eco’s feasibility is not the only thing causing doubts. Theoretically, it should promote integration. But many economists wonder if the currency is even going to solve any problem at all. Most African nations are more interested in trading outside the continent. Intra-Ecowas trade accounts for just 11 per cent of its members’ total trade. It’s practically that way all over the continent — trade between African countries is the lowest globally. So economically, they don’t have so much to gain.

Moreover, history doesn’t make a strong case for a common currency in Africa. The fourteen countries that use the CFA Franc are split into two monetary zones: the Economic and Monetary Community of Central Africa (CEMAC) and the West African Monetary and Economic Union (UEMOA). CEMAC has been using a single currency for over 70 years now, but intra-regional trade still lags around five per cent. In UEMOA, trade flows a bit more freely at 16 per cent. But that is still poor when you consider that their version of the CFA has been in use since 1945. If a single currency did not boost trade among countries that speak the same language, how will it cut through language barriers?

The AU and ECOWAS need to accept that Africa’s future of money is digital. If they still want the single currency ideas to work, they have to embrace digital methods.

Written by Oluwatosin Ogunjuyigbe

Source: https://venturesafrica.com/does-the-eco-have-a-place-in-the-future-of-money/

Front page: Lalasticlala Mynd44

Lol I remember idiots said the Eco failed to launch because of French subversion. How is it France's fault none of the ECOWAS nations met their own criteria for launching the currency the past 20 years? This project won't materialize especially when the biggest economies in the region can't get their acts together to make it happen.

Implementing the eco needs member countries to meet a few criteria:

1. A single-digit inflation rate at the end of each year.
2. A fiscal deficit of no more than 4 per cent of GDP.
3. Central-bank deficit-financing of no more than 10 per cent of the previous year’s tax revenues.
4. Gross external reserves that can give import cover for a minimum of three months.

life na small, always remember that

If we sign and fully comply to the Africa free trade zone agreement then ECO would fly

But for now African free trade zone would finish Nigerian enterprenuers like Innnosun and Peace Air


If Toyota assembly plant in Ghana now has access to Nigerian market through free trade arrangements and payment are done through ECO .. many Nigerians would patronise Toyota and dump IVM

.

Is our problem really with digital payment? Are we not exaggerating the importance of digital payment and pushing resources that can help us better in HDI in the face of our deficits in most of the parameters used for Human Development Index?

FreeStuffsNG:
Is our problem really with digital payment? Are we not exaggerating the importance of digital payment?

If you know how much CBN spends annually to mint Naira notes, then you might think digital

Jerryherd:


If you know how much CBN spends annually to mint Naira notes, then you might think digital

What is the cost of the digital? Can you do a little analysis and comparison for us? So other countries that still use paper does it mean they have not seen the light?

Besides, there is the option of cryptocurrencies, which Africans already use for cross-border transactions.

I've yet to try this but it would be probably be cheaper than using banks or some other financial services. I'm not interested in the E-Naira to say the least. I'd rather buy Eth or btc.

OK

Jerryherd:


If you know how much CBN spends annually to mint Naira notes, then you might think digital

Why mint so so much when cash payment does not necessarily have to be in cash? I just don't like how others set agenda for us to compete on the level of their own priorities. We can achieve better outcome if we use such huge money spent on digital payment hype on just winning the war on overpopulation thst keeps pushing our population growth rate over our GDP growth rate year on year.

To get more people to embrace family planning and supporting the delivery of 24-hour family planning line and intervention costs far far less yet can help bring our growth rate at parenting or lesser than out GDP . This digital payment is not really our priorities and I am not suggesting it's not without its merits.

Please I no wan hear abt that failure call E Naira...

Latidoh1:

What is the cost of the digital? Can you do a little analysis and comparison for us? So other countries that still use paper does it mean they have not seen the light?

Most countries have gone cashless since mobile banking and cards have taking over most transaction.. its only Nigeria trying to play catch-up

For Digital currency, all you need is an active public server maintained by the public.. something like blockchain and cost of transaction would cover cost of individuals running the decentralised servers

Jerryherd:


Most countries have gone cashless since mobile banking and cards have taking over most transaction.. its only Nigeria trying to play catch-up

For Digital currency, all you need is an active public server maintained by the public.. something like blockchain and cost of transaction would cover cost of individuals running the decentralised servers

We are talking digital currency not cashless.

There is nothing to talk about, E-Naira is a huge failure with no purpose! It’s that simple, and nothing is going to change that.

Latidoh1:

We are talking digital currency not cashless.

But Digital currency is also cashless, paperless currency so we are saying the same thing

E-Naira is a digital currency by CBN holding value for your wealth in your wallet on CBN server, same way your Account balance is being held by Nigerian Interbank Server and CBN servers and you only get cash equivalents when you make withdrawal

So to answer you straight forward

Digital currency would cost us less than 1% of all transactions to maintain, and the money would go to server owners


.

Blue3k:


I've yet to try this but it would be probably be cheaper than using banks or some other financial services. I'm not interested in the E-Naira to say the least. I'd rather buy Eth or btc.

Lol if you try sending through Cryptoo u don look the charges unless you're sending from the same platform buh sending to an external wallet comes with alot of charges or you make use of USDT stable coin that one comes with a lesser sending out fee...

inoki247:



Lol if you try sending through Cryptoo u don look the charges unless you're sending from the same platform buh sending to an external wallet comes with alot of charges or you make use of USDT stable coin that one comes with a lesser sending out fee...

Thanks for the tip.

Blue3k:
Lol I remember idiots said the Eco failed to launch because of French subversion. How is it France's fault none of the ECOWAS nations met their own criteria for launching the currency the past 20 years? This project won't materialize especially when the biggest economies in the region can't get their acts together to make it happen.

The problem is countries like Nigeria will never let it work. Cos our corrupt politicians thrive off devaluing our currency for their greedy gains which they won't be able to do with a single pan-African currency.

Latidoh1:

We are talking digital currency not cashless.

digital currency is still geared towards cashless...

If i can use bank mobile app, Internet banking and USSD to make payments, what then is the use of e-naira?


I think we should channel the e-naira energy to fortifying electronic bank transactions, making easy to track fraudulent transfer and be able to apprehend fraudsters.

FreeStuffsNG:
Why mint so so much when cash payment does not necessarily have to be in cash? I just don't like how others set agenda for us to compete on the level of their own priorities. We can achieve better outcome if we use such huge money spent on digital payment hype on just winning the war on overpopulation thst keeps pushing our population growth rate over our GDP growth rate year on year.

To get more people to embrace family planning and supporting the delivery of 24-hour family planning line and intervention costs far far less yet can help bring our growth rate at parenting or lesser than out GDP . This digital payment is not really our priorities and I am not suggesting it's not without its merits.

The reason why priority is given to Digital currency is that it is a faster proven quick fix to our problems, while population control is a very long term approach

If I want to buy a tractor or manufacturing machine from China or US and I contact the buyer.. with Digital currency I can make payment within 30 mins and have shipment in two weeks

Same transaction done in bank would take me 2 days to get proforma invoice tendered to request forex into my domiciliary account and my account would be funded in another day or two, making it 4 days already, before having a wire transfr that would take 3 business working days to reflect


.

Very sound article! Educating and revealing...

To my mind sha, not even Emefiele believed in that digital contraption he launched! All other things being equal, the extremely low comparative advantage in productivity index between Africa to the rest of the world not only makes it near impossible to have a favourable intra-continental balance of trade but also means Africa will throng behind other continents for a long time to come.

Check out some factors determining this:

1. Comparative attrition rate of workforce: Africa today is the numero uno in generating economic emigrants to other continents. Where other immigrants to Africa come as investors, technical superiors etc, we exchange the move for international students/researchers (who eventually stayed back abroad), refugee and asylum seekers and job seekers abroad - invariably, all are seeking to receive economic help than they give.

2. Xenocentrism: xenocentrism is the opposite of ethnocentrism. While the latter encourages and promotes the use, preference and patronage of local products and services, the latter is a drive for imported goods and services. This doesn't stop at just the goods and services but also extends to the preference of dealing in the foreign currencies than the local.

3. Poor spirit of research and development: while other continents invest heavily in research and development in almost all aspects of their economy, thus leading to their growth in GDP across board, African nations only make significant efforts to improve trade! We failed to learn that modern economy is more about what's in the head than what's on the hands or beneath the foot! Many of our research institutions are moribund. It is not uncommon to see a finance department of NNPC, DISCOs, MDAs etc bustling with activities and the officials of the department looking well fed while the Research and Development department is as idle as a painted ship and the staffers appearing bland!

Need I say more?

FreeStuffsNG:
Why mint so so much when cash payment does not necessarily have to be in cash? I just don't like how others set agenda for us to compete on the level of their own priorities. We can achieve better outcome if we use such huge money spent on digital payment hype on just winning the war on overpopulation thst keeps pushing our population growth rate over our GDP growth rate year on year.

To get more people to embrace family planning and supporting the delivery of 24-hour family planning line and intervention costs far far less yet can help bring our growth rate at parenting or lesser than out GDP . This digital payment is not really our priorities and I am not suggesting it's not without its merits.

What you proposed on family planning is good, excellent. Nigeria really needs to control her population at all cost before things get so crazy in coming years.



But then, Islam (Nigerian Muslims, especially the Northern Muslims) is a big barrier to this. Nigerian Muslims wont accept this proposal, and their senators and politicians will stand against it.



That is why every reasonable Nigerian from the south is asking for either total restructuring of Nigeria to function as independent regions with a weaker central government so regions can adopt whats best for them and grow at their own pace. This will reduce the outcries for complete secession.

Jerryherd:




If we sign and fully comply to the Africa free trade zone agreement then ECO would fly

But for now African free trade zone would finish Nigerian enterprenuers like Innnosun and Peace Air


If Toyota assembly plant in Ghana now has access to Nigerian market through free trade arrangements and payment are done through ECO .. may Nigerians would patronise Toyota and dump IVM

.

Thank goodness you admit that there is one policy of Nigeria which favours Igbo men businesses: innoson and air peace. Coz I have been on the receiving end of battering criticisms from igbos on Twitter who antagonize my stance that Dangote did not set up a peagout assembly plant in Kaduna just to usurp innoson, that both companies can coexist to create healthy competition in the Nigeria automobile market. Igbos always see anything that seems to tilt to other people in the country as anti-igbo, but they will not see other polices of the government that favour them.

Jerryherd:

If Toyota assembly plant in Ghana now has access to Nigerian market through free trade arrangements and payment are done through ECO .. may Nigerians would patronise Toyota and dump IVM

Doesn't Toyota Ghanaian manufacturers have access to Nigerians because of ECOWAS free trade in this example. I think you should switch the country in the example.

Is E-naira a currency?

Jerryherd:


But Digital currency is also cashless, paperless currency so we are saying the same thing

E-Naira is a digital currency by CBN holding value for your wealth in your wallet on CBN server, same way your Account balance is being held by Nigerian Interbank Server and CBN servers and you only get cash equivalents when you make withdrawal

So to answer you straight forward

Digital currency would cost us less than 1% of all transactions to maintain, and the money would go to server owners
.

You guys should stop spreading falsehood. E-naira is not a currency but a payment wallet, just like paga, opay, etranzact etc.