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Tuesday, 13 November, 2001, 13:12 GMT
Doubts grow over African monetary union
Trader counting francs
CFA francs will be in circulation for some time to come
As Europe moves closer to the introduction of the euro, West African aspirations to introduce a single currency by 2004 look increasingly unlikely.

The Economic Community of West African States (ECOWAS) has plans to merge a new single currency with the existing CFA franc-zone creating a economic block of 15 countries.

But, like the European single currency, the success of the project depends on the economic convergence of the member countries.

"That timetable is extremely ambitious and the question is whether the CFA franc-zone would want to give up its currency," said Standard Chartered's Razia Khan.

"For starters, the existence of the CFA franc has been very successful and has achieved far lower inflation - 2-3% for its members - while in Ghana and Nigeria, inflation is nowhere near that," she said.

Last year Nigeria, the largest West African Monetary Union (WAMU) member, reported inflation of 6.5% while the second largest Ghana had inflation over 22%.

CFA franc 'defective'

Nigeria and Ghana are spearheading efforts to launch West African Monetary Union, which groups them with Gambia, Guinea, Liberia and Sierra Leone in a monetary union with a currency that is still nameless.

"Just as the naira in Nigeria and the cedi in Ghana are controlled by these countries, the new WAMU would facilitate a merger of the CFA zone currency ... into a single West African currency to be controlled entirely from West Africa," the Nigerian minister in charge of co-operation and integration in Africa, Bimbola Ugunkelu told the PANA new agency.

West Africa's existing single monetary zone groups seven countries - Benin, Burkina Faso, Cote d'Ivorie, Mali, Niger, Senegal and Togo - under the CFA franc, and is backed by the French Treasury.

Mr Ugunkelu described the CFA franc as "defective", because of its peg against the French franc and the euro.

Euro threat

Falling prices in the cocoa and oil sectors, two key exports for many of these African nations, also threaten the project.

And a significant rise in the strength of the euro could also create difficulties.

"The prospect of much weaker commodity prices and rising euro could pose problems," said Ms Khan.

Almost half of the region's trade is with European Union countries, and if the euro strengthens then foreign currency earnings would fall for the region.

See also:

05 Sep 01 | Africa
Euro printing hits Africa
24 Sep 01 | Business
Ivory Coast protects cocoa farmers
29 May 01 | Business
West urged to lift African imports
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