Economic Community of West African States (ECOWAS) Decides on Eco, the Single Currency Not on Blockchain
The Economic Community of West African States (ECOWAS) will launch a single state currency, “ECO”, in January 2020.
During the 55th Heads of States meeting held in Abuja, Nigeria on June 29th, 2019, the leaders present endorsed Eco, the single currency expected to be launched in January 2020. The currency is expected to boost trade across the 15-state region while increasing the economic output and promoting growth across the smaller economies in the region.
The development and name of the currency was proposed by the “Ministerial Committee on the Single Currency”, the committee behind the implementation of the currency. Despite the progress being made in the digital currency world, the committee decided against building the currency on a blockchain adopting the European Union’s “Euro” format.
Not On Blockchain!
Every financial motive by authorities and governments, especially the monetary developments, opens up an opportunity for the adoption of blockchains and cryptocurrencies. The cryptocurrency community hoped this would be one of those opportunities owing to the positive developments blockchain technology offers developing countries. However, it does not seem likely happen as no sign of digitization was mentioned by the committee in their report.
Why Eco, A Single Bloc Currency?
A change of this magnitude faces a couple of challenges going forward such as the existing eight country currency bloc including Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal, and Togo. The eight countries use the Central African Francs (CFA) that is pegged to France national reserves. Furthermore, the single currency bloc will need to work out some of the demand-supply challenges being faced by the main global currency blocs – US/China and the Eurozone.
While the benefits of the single bloc currency are set to be more economical, the political factor also played its part in the decision-making process. The African countries are hoping for political and economic freedom from their colonizers and to do this sustainability of their finances is a key factor.
The Fixed Rate Problem – Nigeria
As mentioned before the US/China and Eurozone trade blocs, which use a fixed rate, are currently facing a demand-supply conundrum between the richer and poorer countries in the system. Eco currency is set to face a similar problem (or at a much greater scale) as Nigeria contributes to over two-thirds of the economic output of the region.
The oil-rich state is beset with problems as it will need to increase its aggregate demand to shoulder the burden of the currency arrangements made with the poorer countries. Speaking on the issue, Andrew S. Nevin, chief economist at PwC West Africa, said the single currency idea may not be the best idea for the region given Nigeria’s indecision to sign up for regional integration in ECOWAS. He further says,
“You should first improve the implementation of existing ECOWAS trading agreements, then improve the physical infrastructure. The third more pressing issue would be the ability to trade in every country’s native currency, without using a third currency like euro or dollars.”
The blockchain community is waiting on the day governments will adopt the technology and integrate them on the platforms. This will not happen with Eco, at least during the launch in January 2020. However, given the sentiments of experts and analysts in the field, blockchain technology will lead the financial revolution in emerging nations, which opens a possible integration idea in the future.