April 20 marked the 10th anniversary of the Accra Declaration, the agreement among a group of mainly anglophone west African countries to establish the region's second monetary union, the West African Monetary Zone (WAMZ).
Since its inception, the project has, however, been subject to a number of setbacks that have cast doubt on the possibility of a second monetary union in the region to complement that of the existing and predominantly francophone West African Economic and Monetary Union (WAEMU).
The founding members of WAMZ were Gambia, Ghana, Guinea, Nigeria and Sierra Leone. Liberia joined in February.
WAMZ's original target was to execute a monetary union within 18 months of the Accra Declaration, an aim that was deemed overambitious by the head of the West African Monetary Institute (WAMI), the body in charge of facilitating the union.
"WAMZ's targets from the outset were too ambitious," says Dr Temitope Oshikoya, director-general of WAMI. "The initial goal of introducing a monetary union within 18 months was totally unrealistic. The Gulf Co-operation Council, a richer and more homogeneous group of nations, started at the same time as us but gave itself a 10-year timescale."
Pursuing convergence
Macroeconomic convergence is central to WAMZ; its pursuit has taken on extra significance in light of Greece's fiscal troubles affecting the well-being of the eurozone.
"If you look at the eurozone's experience, it shows that monetary union is not a joke. It has benefits and costs. If you do not have the macroeconomic, financial and trade fundamentals in order, there could be problems, as happened in Greece. The heads of states and the convergence council of ministers and governors of WAMZ were right in saying that the introduction of a monetary union must be delayed until 2015," says Mr Oshikoya.
The new target of 2015 follows a trend of delays that have seen the project fail to meet previous targets of 2003, 2005 and 2009. Is this a concern for the viability of WAMZ? Not in the view of Mr Oshikoya. "The delays give me more optimism. The experience of the eurozone has shown us that this is the right way. Once the monetary union begins, we do not want it to break down."
Renewed hope
Recent developments offer renewed hope for WAMZ. Late last year, WAMI prepared a strategic plan covering five areas - macroeconomic convergence, financial integration, regional trade integration, payment systems development, and building up member states' institutions and capacity - in order to reach a stable union faster.
Of WAMZ's member states, Gambia is meeting all four criteria for macroeconomic convergence: single-digit inflation rate; a fiscal deficit of less than 4% of gross domestic product; foreign reserves to cover three months' worth of imports; and the country's central bank not financing more than 10% of the previous year's fiscal deficit. Nigeria has met most of the criteria and is expected to meet all four by the end of 2010. Sierra Leone and Guinea, the only non-anglophone member, conform to two of the criteria. Ghana has not met any of the four but is expected to improve its position over the next two years.
The project was given a boost by the accession of Liberia in February. Mr Oshikoya says: "I am pleased to see that there is a great deal of political will in favour of WAMZ.
Liberia's recent move to join us is a great endorsement of our project."
Two become one?
A more comprehensive monetary union, comprising WAMZ and WAEMU, remains the stated aim. However, the realisation of WAMZ is a fundamental pre-requisite for that to take place, according to Mr Oshikoya.
"For WAEMU and WAMZ to merge, it is imperative that WAMZ takes off," he says. "It is much easier to merge two groups than to merge several countries with another group. This process will present challenges and opportunities but I am confident that the two groups can come together by 2020."
