Nigeria and Ghana digital currencies threaten ECOWAS common currency – Blueprint Newspapers Limited

From left to right: Jules Tapsoba, PATF main expert on tax expenditure, Traoré Habasso, director, public finance and internal taxation, UEMOA Commission, Mohammed Nami, PRESIDENT OF FIRS, Salifou Tiemtore, director, Customs and taxation union Sales Representative, ECOWAS and Olivia Amoussa, Limpico West Africa Director in a Photography group with participants at the ECOWAS Conference on Taxation held in Abuja

Digital currencies in Ghana and Nigeria threaten two decades of work towards a common legal tender in West Africa.

The adoption of the eco, a new currency for the whole region, would help to eliminate trade and currency barriers, stimulate economic activity and improve the standard of living of the community of 385 million people, according to the Community of West African States (Ecowa). .

Seven currencies are currently in use in the 15 West African countries, with eight predominantly French-speaking countries using the CFA franc. Other countries have their own currencies, none of which are freely convertible, according to a Quartz publication.

After multiple postponements (in 2005, 2010 and 2014) following its conception in 2003, a viable deadline for the launch of the eco was set for January 2020 but, as feared, this never happened.

Some experts fear that the dream project of a single currency may be further delayed by the emergence of central bank digital currencies (CBDCs) in the economic powers of West Africa.
A central bank digital currency is the virtual or digital form of a country’s fiat currency. It is regulated by the country’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 conducted research.

Nigeria partnered with Bitt, a global fintech company, to launch its CBDC in October 2021, while Ghana hired German company Giesecke + Devrient for its e-cedi pilot project a month earlier.

Although officials from both countries claim that their respective digital currencies are intended to promote financial inclusion by integrating the unbanked into the financial system, the timing of these initiatives strangely coincides with the stumbling effort to get the eco off the ground. , according to a financial professional.

“At this stage, we are supposed to talk about e-eco or eco itself, and not electronic versions of other currencies in the sub-region”, explains Ahmed Kone, researcher at the University of Bamako.

Social sciences and management in Mali. “If Nigeria and Ghana test central bank digital currencies, it indicates that they are losing faith in the common currency project.”

While the idea of ​​having a common currency excites many in West Africa, the project seems far from materialized. Four main convergence criteria must be fulfilled by each member country before the eco can be implemented. This is a single-digit inflation rate at the end of each year, a budget deficit of no more than four percent of gross domestic product (GDP), a central bank funding gap not exceeding 10 percent of the amount of the previous year. tax revenues and gross external reserves that can cover imports for at least three months.

But most of the 15 countries might not be able to meet all of the above criteria for years. Only Cape Verde, Liberia, Ghana and Togo have encountered some of them, but not systematically.
Strict standards are a major stumbling block for the green project, and that could be the reason some space nations think otherwise, says Muhammad Umar, senior researcher at the Nigerian branch of the Center for Democracy and Development ( CDD).

“When I read that Nigeria and Ghana were testing CBDCs, it immediately confirmed the fears I had for the eco,” he says. “Would this happen in 2027 as some speculate? Would this happen in 2030? No one is sure because the criteria are too strict and they do not reflect the realities of our economies.

The launch of the e-naira in Nigeria comes as no surprise to some observers.
“Nigeria should play a catalytic role in this project because of its weight and influence in the region,” said Lawani Babatunde, a financial journalist based in Côte d’Ivoire. “But we don’t see this because maybe they think they haven’t lost or gained anything from a common currency.

Meanwhile, Nigeria is the only country in West Africa to have a printer and a banknote-making workshop. The Nigerian Security Printing and Minting Company Limited prints the naira and could possibly be selected to hit the future eco if member states manage to find the regional solution.

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