Governance
Hopes for a West African Single Currency Fade as Ghana and Nigeria Launch Digital Money By kingsley kobo
DIGITAL CURRENCIES in Ghana and Nigeria are threatening two decades of work towards a common legal tender in West Africa. The adoption of the eco (pdf), a new currency for the entire region, would help remove trade and monetary barriers, boost economic activity, and improve living standards in the community of 385 million people, according to the Economic Community of West African States (ECOWAS). Seven currencies are currently in use in West Africa’s 15 countries, with eight mostly Frenchspeaking nations using CFA francs. The remaining countries have their own currencies, none of which is freely convertible. After multiple postponements (in 2005, 2010, and 2014) following its conception in 2003, a workable deadline for the launch of the eco was set for January 2020 but, as feared, it never happened. Some experts fear the single-currency dream project could be further stunted by the emergence of central-bank digital currencies (CBDC) in West Africa’s economic powerhouses. Central-bank digital currencies are emerging in Ghana and Nigeria. A central-bank digital currency is the virtual or digital form of a country’s fiat currency. It is regulated by the nation’s central bank. Nigeria and Ghana are the first two countries to roll out such projects in Africa, although Rwanda, South Africa, Tanzania, and Kenya have also been conducting research. Nigeria partnered with Bitt, a global financial technology company, to launch its CBDC in October 2021, while Ghana hired German firm Giesecke+Devrient for its e-cedi pilot a month earlier. Although officials from both countries claim that their respective digital currencies are meant
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to promote financial inclusion by bringing the unbanked into the financial system, the timing of those initiatives oddly coincides with the stumbling effort to get eco off the ground, according to one finance professional. “At this stage, we are supposed to be talking about e-eco or eco itself, and not the electronic versions of other currencies in the sub-region,” says Ahmed Kone, researcher at Bamako University of Social
Sciences and Management in Mali. “If Nigeria and Ghana are testing central-bank digital currencies, it indicates that they are losing faith in the common currency project.” More stumbling blocks to a common currency. While the idea of having a common currency excites many in West Africa, the project seems a long way from fruition. Four primary convergence criteria must be met by each member country before the eco could be implemented. • A single-digit inflation rate at the end of each
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