In a blow to trade prospects for Senegal and seven other countries in West Africa, the much-discussed plans to replace the CFA Franc with the ECO currency look set to remain stalled for at least another year.
Under the ECO initiative, the countries’ central bank reserves would no longer be placed with the French Treasury, and France would no longer have a representative on the central bank that controls the CFA Franc region, known as West African Economic and Monetary Union, or UEOMA by its initials in French, AZA, Africa’s largest non-bank currency broker by trading volume,, said in note Thursday.
Ultimately, the ECO is envisaged for adoption across the Economic Community of West African States (Ecowas) region, which has 15 member countries including Ghana and Nigeria.
Senegal is among the countries that would benefit most from the ECO, as it would enable the smooth exchange of goods and services within the region and reduce the cost of transactions. Yet Senegal is among 10 member countries that would fail to meet the single currency convergence criteria set out by Ecowas, which include a budget deficit of not more than 4%, an inflation rate no higher than 5%, and debts valued at less than 70% of GDP. These strict criteria are a major challenge to the currency’s introduction and, in our opinion, it seems unlikely that they will be met by most countries for at least another year.
This is a setback for the region’s recovery. In Senegal, economic output has been mixed. Industrial production increased by 9.2% in January compared with the same month last year, according to the National Agency for Statistics and Demography, while remaining well below the months of October and November, which recorded jumps of 14% and 16.1%, respectively.
The agency said January’s strong showing was due to robust performance in the mining, manufacturing, water and electricity production sectors. Manufacturing production surged by 6.8% in January compared with the same month a year earlier, mainly because of an increase in refining and coking, and chemical and pharmaceutical production. On the other hand, the agro-food sector plummeted by 14.4% because of a steep fall in the production of food products.
