As far back as 2002, in Diamond Bank’s intranet, a quote welcomed all staff into the system. It was from a speech which Diamond Bank Founder, Pascal Dozie, had delivered on trade, banking and regional integration. He postulated the implication of a single currency and why Diamond Bank must pursue a regional growth in ECOWAS. He used the phrase, “a name, possibly Eco” to describe the potential currency with a supranational bank within the region. Diamond Bank was setting up the Benin Republic branch then.
Single currency has many advantages, on trade, but in heterogeneous markets, there is a huge risk of welfare losses. Typically, when nations lose autonomy to devalue their currencies to adjust equilibrium in international markets, a currency region could be subjected to the vagaries of the most dominant economies in the bloc.
So, in ECOWAS, if crude oil price drops, Nigeria typically devalues its currency to re-calibrate, but under a single currency, it would lose that ability since the Central Bank of Nigeria would not be controlling the regional currency which would be under the control of a supranational bank. But if the paralysis becomes acute and the regional bank devalues, say Eco, some countries like Gambia and Benin Republic have been impacted instead of just Nigeria.
This explains why President Buhari’s statement to some ECOWAS countries which are trying to play a huge game, flipping CFA Franc as Eco, leaving some countries out, is important. Eco is never new, going back to Mr Dozie’s writing. But when a small bloc, UEMOA, tries to take over it, it makes the whole process harder. You cannot just hijack something everyone has been working for decades and expect others to party.
‘‘We have urged our Ministers towards an expeditious path to success. It, therefore, gives me an uneasy feeling that the UEMOA Zone now wishes to take up the Eco in replacement for its CFA Franc ahead of the rest of the Member States.
‘‘This is in addition to deviating from the Community Act on a consistent attainment of convergence in the three years running up to the introduction of the currency, and our subsequent reinforcing directives.
‘‘I am informed that the French Ministers have approved a bill to reform the CFA Franc and most, if not all of the UEMOA Member States, have already passed legislations in their various Parliaments to that effect.
‘‘We must proceed with caution and comply with the agreed process of reaching our collective goal while treating each other with utmost respect. Without these, our ambitions for a strategic Monetary Union as an ECOWAS bloc could very well be in serious jeopardy,’’ he said.
As I wrote for the African Heads of State during an African Union Congress, the trajectory must be prior convergence of regional economies before a single African currency. What UEMOA is doing right now will make it challenging in ECOWAS. I hope they play with caution and allow a natural attainment of convergence to happen.