Dr Boris Houenou on Eco : “The future of money depends…”

Will the ECO one day be the single currency of all of West Africa or will it remain at best only an avatar of the CFA franc? ? In this interview, Doctor Boris Houenou, Renowned economist and observer of political dynamics, societal and economic issues on the African continent, willingly answered our questions. Read instead !!!

Do you really take the ECO as a “new currency” to come? ?

It depends on which of the ECOs we are talking about. The transformation of CFA into ECO is only stipulated in the revised agreement in the preamble. So, I cannot say when we would see “ECO” stamped banknotes in circulation in UEMOA. The decision to adopt or change a name was certainly endorsed by heads of state in the region, but its implementation will take years. On the other hand, if you are talking about the ECO of ECOWAS, I think that it is possible, but I can't predict when.

What is preventing this project from being completed? ?

In the opinion of many observers, ECOWAS ECO project faces obstacles due to Nigeria's reluctance, asymmetries of economic shocks and their absorption mechanisms in ECOWAS countries. So, the quest for macroeconomic convergence as a sine qua non condition for the advent of money becomes a major challenge. I have personally worked on this issue, analyzing successive reports on macroeconomic convergence and modeling their similarity over time. I reached the conclusion that the search for macroeconomic convergence as a non-negotiable prerequisite for a project that is both economic, political and social, such as the creation of a common currency, is an excessive simplification which hinders the realization of the project. However, I remain optimistic about an acceleration of trade integration between African countries. For example, if the African Continental Free Trade Area (ORDERS) succeeded, this might provide little reason for leadership to procrastinate. Occasionally, the factors that accelerate an event are not in the plans.

The current agreement ratified by Benin mainly talks about : stopping the centralization of foreign exchange reserves at the French Treasury ; the transfer from the Central Bank of West African States of the resources available in the operating account and closure of the said; and, the withdrawal of all French representatives from the decision-making and management bodies of WAMU… Can we say that these are significant advances for the area? ?

On the question of symbols, I think the revised agreement provides some form of answer. However, the question is whether what young people in the UEMOA zone are asking of their leaders is a simple symbol or whether they are expecting a stronger political commitment., or even a complete overhaul. I don't have the answer to this question. In a more advanced form of these reforms, I would have liked to see more listening. A reform without listening is half a reform. It seemed to me that the French side organized an evaluation of this agreement, commissioned a group of experts for an enlightening report for the legislator, then organized a debate to discuss French interests in this revised agreement. If France does it with as much democratic civility and consultation, how much more important is it for countries where people hold and use this currency to organize a broader debate, structure, but open to listening, in order to begin a more in-depth reading of the will and criticisms coming from those not involved, defenders, experts and non-experts on this issue.

We must make the effort to evaluate any reform ex-ante before implementing them, especially in a context of limited resources where we are called upon not to make adjustments that may not fully meet the will of the people. However, an adjustment, a sort of half-filled glass, can point the way in the right direction. In general, the people, in any negotiation, particularly with external actors, should be seen as the shield of leadership. We often forget this. As I specified above, it is not that difficult to understand what a currency is and, printer living in Abomey-Calavi agrees, because of its social dimension, political and economic, requires that as many people as possible have a place at the table.

What changes are likely to benefit people? ?

As I mentioned previously, the fundamentals of the currency remain unchanged. So, the performance of the zone with regard to the BCEAO mandate should continue. This includes in particular controlling inflation, a parameter in which the CFA performs rather well compared to the rest of the sub-region. Moreover, the stability of the economic framework is ensured in particular thanks to the stability of the currency, the euro, with which the fixed parity is maintained. So, in an inflationary context, like that observed for example in Ghana or even Nigeria, the CFA positions itself as a refuge, which is certainly an asset.

The disadvantages are well known and widely debated. I'm not going to come back to it here.. Since currency also has an aspect of identity and sovereignty, I refer you to the passionate and critical debates on this subject. You won't need much time to hear them.

What do you say overall about the future of this currency? ?

It was necessary to wait 46 years to see a revision of the agreement 1973. I don't know when the next review will be, but it is not improbable. The future of the currency depends on the internal dynamics of the WAMU, but also within ECOWAS, without forgetting France. However, it is above all a political decision, therefore difficult to predict. For example, no one would have imagined that the critics of the agreement 1973 could trigger a series of events that led to the revised agreement of the 21 December 2019. However, I dare to make a prediction : the revised agreement will not last as long before being assigned or revised, if the criticisms are not appeased.

A word to conclude

I will conclude with a wish : that of one day seeing a currency that truly reflects the will of the populations, as part of a careful reform and listening to their needs and aspirations.

Production : Damien TOLOMISSI