ECOWAS single currency: the PANACEA?
By Kormi Nobert Goodsman
The Economic Community of West African States (ECOWAS), as a regional body, has over the years only existed as a very large bulldog with virtually no teeth. Its leaders just like in the mother body AU, are simply a group of fine gentlemen who meet periodically to speak excellent Paris-bred French and the Queen’s English over bottles of wine and buffet; but the dialogues and discussions they have at those meetings do not make any impact on the lives of the ordinary citizens living in their countries.
The abysmal failure of the regional bloc since its inception has dominated discussions over the years. In fact there could not be any justification for having limited trade in a subregion where all the countries share almost everything in common in relation to trade. To this end, introduction of a single currency will be a very good step towards addressing that challenge.
As it stands, traders who want to enter other markets would have to first convert their currency into dollar and convert it again into the local currency in the area of trade before making transactions. By the time they do that twice or thrice they would have lost a lot of money. The next thing is about harmonization of our markets. If we have a stabilization agreement in place which I believe we have; it will also help us have a standardized interest rate regime all by the powers of the single currency.
Imagine the challenges faced by manufacturers in Ghana who want to trade in Sierra Leone or Liberia; they virtually have to plan over and over again; plan on the interest rate perspective and on exchange rate perspective before they can move goods into these markets. But it is easier to do that if we have a single market driven by a single currency. The single currency will not only boost trade but will also enhance easy access to markets.
However, we must not put the cart before the horse. We must first make sure that all stabilization arrangements are in place. There must be an efficient local revenue collection system in place; fiscal policies and fiscal economies must be made stable and consolidated, because if we don’t do that, we are likely to run into the problems the Eurozone got into and eventually cripple out.
The issue of a single currency is long overdue. The reasons clearly include lack of political will and also from the economic perspective, it was evident we could not do this five or ten years ago. But now it is critical that we take steps towards achieving that feat. It is also critical that we follow economic stabilization policies before moving into the single currency era.
There are other arguments making rounds which suggest that the Ecowas subregion houses some of the most poorest countries on the continent who would have very little to offer in terms of trade, therefore it will be unwise to open up to all these countries and cut down trade with China, US and other great economies of the world. However, it must be noted that trade with the so-called world economies like China will never make Africans rich. It has never helped us in the past. They simply made Africa their dump sites and still continue to do so.
However, if we set the indicators right and strictly follow them, the dependency of these poorer countries we talk about would be less; perhaps among six or seven poorer countries, there may be only one feeding on the bigger economies. Also, it should be remembered that all these countries are still benefiting from aid. So they will continue to enjoy these aids from their own markets and sources. Therefore, the argument of having so many poor countries in the subregion feeding on the bigger economies should we have a single market is not strong enough not to have a single currency.
Under the single currency trade, the bigger markets in the subregion like the Nigerian and the Ivorian market will give us access to trade with over 300 million people, and that should mean a lot to us. Trade is not all about industrial finished produce, it is also about farm produce. A lot is going to change in the processes of planting, harvesting and selling farm produce. The change will be felt in financial services too because we will be dealing with new financial instruments and new policy directions. So it is certainly ideal to take all the precautions but we must start from somewhere.
When we talk about mobility, we already have mobility as an agreement in the single currency deal. With this, member countries are going to open their gates for economic migrants who will float goods in and out of the countries, and there will be new companies also that will help in those transactions. The move will certainly create employment for the teeming unemployed youths in the subregion. Many youths will take advantage of the new era to engage in serious farming knowing that there is unlimited market for their farm produce.
In fact intra-African trade is virtually nonexistent. Very little is seen in terms of African countries trying to establish trade relations among each other. It is however worse in the Ecowas subregion. Meanwhile Nigeria which is Ghana’s neighbor is into serious manufacturing and Ghana is no exception. So why can’t we cross the boarders to exchange these goods for a great deal? For instance, Kasapreko crossed the boarder into Nigeria sometime ago and was received quite well. Why can’t we take a cue from such a single trade arrangement and develop similar ones?
Better still, we may consider going back to try and fast-track the Anglophone agreement so that we the Anglophone countries with a common ground will think through the deal properly as we move toward 2020. It can only be a single currency for trade just for the interim before moving all out into the single currency zone. This is because, the single currency move also invokes matters relating to sovereignty of the member countries, and great dialogue must be held to address those issues.
Ghana indeed has a lot of opportunities in this trade relations. Ghana could become the financial services center of this single currency zone which in itself will change the dynamics here, because, we can trade with London, New York and Tokyo due to the political stability and relative peace in the country. In fact there must be a new EU; and that new EU must come from a single market agreement.
Meanwhile, for us to enjoy the full benefit of the single market as a country, we must also put infrastructure in place to ensure easy movement of goods. If we start a single currency and the roads are bad, we may find it inconvenient importing or exporting agricultural products. We need to connect our country with rail lines to transport goods at a very low cost. Our ports should be low-cost ports. Currently, shipping containers to and from West Africa is one of the the most expensive in the world. Talking about road transport, next time try using the roads from Accra to Lagos and see the number of roadblocks on the way. These are some of the challenges that need to be resolved whiles working towards the single currency.
Indeed the time has come to move beyond our individual markets and look onto regional and global platforms. But for the mean time, from economic point of view, our politicians could establish a trade platform within the subregion where any other foreign bloc which want to trade with us would first have to come onto; this way, we will command a higher negotiating power whiles working at the single currency zone.
Africa needs high negotiation power. Now we have all found oil dotted along the coast on the map; Nigerian, Equatorial Guinea, Cote D’ Ivoire and others. What we need is a common platform to gain a higher negotiation power which is being discussed now. But it will be prudent for us to test our readiness against all these mechanisms dissected above. Single currency is the way to go. It may not happen in 2020 but let us start working towards it.
Africa Global News Publication
