Okonjo-Iweala Warns against Hasty Monetary Union for West African Zone

Taking a cue from the recent Eurozone financial crisis which almost crippled all economies in the Euro area, Ngozi Okonjo-Iweala, the coordinating minister for the economy and minister of finance, is now warning member states of the West African Monetary Zone (WAMZ) to be cautious and not hurry into adopting the long thought-out monetary union for the zone.

Okonjo-Iweala’s warning on Thursday was because member states of WAMZ, which a few years back conceived the idea of establishing a common monetary union and a single currency, are finding it difficult to meet all set convergence criteria necessary for the project to take off.

 

Even the latest January 1, 2015 launch date is already missed because only Nigeria met all the four primary convergence criteria, a situation which now raises concerns around whether the monetary union project is even feasible at all.

Speaking at the convergence meeting of the WAMZ finance ministers and central bank governors in Abuja, she said that the consequences of a failed monetary union, as was seen in the Eurozone is huge as she raised worries that Nigeria, being the largest economy in the zone and Africa would likely bear the brunt if the project is hastily embarked on and eventually fails.

She said that a progress review of the project showed that there were still some persisting challenges.

According to her, most states failed in containing inflation within single digits, also noting lingering challenges of fiscal deficit.

She said these developments underscore the need to deepen the fiscal and monetary policy coordination across member states, adding that past experiences have shown the need to persevere in overcoming the overwhelming challenges of creating a monetary union.

To this end, Okonjo-Iweala noted that it would be extremely important that a high degree of consistent macroeconomic work be complemented by sound financial system in all member states.

“Like what happened in European Union, some members were not ready but they went into the union that was not a very solid platform and consequently, when the financial crisis came, they were not able to withstand,” she stressed.

“So before we go in, it is very important that we make sure we get everything right, there is nobody chasing us behind our back. We have a target date, but let’s have a quality launch, that can be sustained because, if not, members will begin to exit when they cannot keep up with the criteria. And that does not help,” she warned.

The coordinating minister strongly advised all the countries to now focus on achieving those set criteria, especially the macroeconomic ones, as she equally commended the six countries for their efforts towards the monetary union launch.

“And the reason is that Nigeria is the largest economy in Africa, we are likely to bear the brunt of any union or launch that is not based on solid grounds.

“So let us take our time, the set time comes and we are not quite ready, we should not be shy to say we are not ready and then rush into something because the consequences of a failed monetary union are severe,” she told the meeting.