(ARTICLE) The Likely Failure of the Adoption of ‘Eco’ as Currency for Ecowas (Vol.1&2) ~Prof. Tweneboah Senzu

Prof. Tweneboah Senzu (Economist & Investment Banker)

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People exchanging money in the market popularly known as 'black market'

‘Beginning in January 2020, countries within the West African sub-region will be able to use a single currency called ECO. The currency was adopted by the Authority of ECOWAS Heads of State and Government on Saturday in Nigeria’s capital Abuja. The West African leaders endorsed the currency at their 55th Ordinary Session and approved a road map towards the currency’s issuance in January 2020.’  ~ Africafeeds.com

To respond to above update from the recently held 55th Ordinary Session  will be addressed into two main thematic areas.

1.The historical evidence to justify the failure of ‘ECO’ adoption.
2.The Technical Analysis behind the currency weight.

Brief Historical Evidence justifying the ‘ECO’ currency adoption report is a fraud.
First of all, the proof that it’s just an empty announcement and lacks any realistic implementation, could be analyzed from the content of the published report from the ECOWAS commission secretary. Which states “It is a currency adopted by the Authority of ECOWAS Head of State and Government” and they are now urged as a commission to work with West Africa Monetary Institute and West Africa Monetary Agency. Is it not enough to prove the fraud nature of the report? It is just like presenting a brand new car to the market with a high customer expectation of a finished product and finally the owners of the marketed car are requested to work with the engine developers to help in setting in an engine into the car, makes the proposed brand new car a fraud.

Let now analyze the existence of agencies behind the ‘ECO’. 1996, West African monetary agency was established with a focused mandatory program termed as ‘ECOWAS monetary cooperation’ charged on monetary integration in the sub-region and to ensure the establishment of a single monetary zone in West Africa, paving the way for eventual conduct of single monetary policy and the establishment of a single currency. Placed under the authority of a committee of Governors of member Central Banks. Their mission on a single currency had not been realized up to date.

Then came West Africa Monetary Institute an Independent body from the formal, set-up in Accra in January 2001. The Institute was to undertake a technical preparation for the establishment of common West Africa Central Bank and the launching of a single currency for the West Africa monetary zone. Only five countries in West Africa signed which were Ghana, Sierra Leon, Nigeria, Guinea, and the Gambia till Liberia joined later. The date initiated for the single currency was on January 1st, 2003 which failed and postponed it to January 1st, 2015, which equally failed till date. I wonder why such a single currency adoption by ECOWAS committee will be taken seriously when the ECOWAS Central Bank itself is not yet in existence.

You observe a simple characteristic trend from the historical document, typical of Africa never united in any common vision. Just a single currency agenda with two institutional approaches yet both had failed up to date which my Vol.2 will justify on the grounds of technical analysis why the common vision seems not to be possible

The Technical Analysis (Vol 2.)

According to the commission report, the road to the adoption of the currency depends on the following;

1.Having a budget deficit of a member country not more than 3%
2.Average annual inflation of member country not less than 10%
3.Having a long term of annual inflation of not more than 5% by 2019.
4. Central Banks Financing budget deficit of home countries should not be more than 10% of the previous year’s tax revenue
5.Nominal Exchange rate variation of member country should not exceed +/- 10%

With this kind of requirement list, just conduct a historical data analysis just 5years and below among member countries of ECOWAS, resorting to 10years data will cause a huge variance. And find out if even 10% of any of the member country had been able to consistently within the 5years met this requirement. This concludes that the benchmark has even forfeited the successful adoption of the ‘ECO’ as a valuable unit for exchange.

Finally, what is the ‘ECO’ as a new currency going to be backed with? Gold? Or operate as a free fall currency. You must note that the Economic grounds to hold the position of the ECO-currency as a free fall at the exchange market will fail in a matter of a short time period because all the basket weighted average of currency to drive the ‘ECO’ are soft-currency at the global exchange market. Hence how will the ECO- be metrically valued in pairing with both the local and the hard currencies possibly the convertible currency which is the dollar? That calculation is not econometrically solved, how do you then proclaim it usage or they are promoting eco-crypto-currency? That is an argument for another day.

 

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