WEST AFRICAN MONETARY INSTITUTE

INTRODUCTION

The Heads of State of five ECOWAS countries, as part of the fast-track approach to economic integration, decided in Accra, Ghana, April 20, 2000 to establish a second monetary zone to be known as the West African Monetary Zone (WAMZ) by the year 2003. These countries namely The Gambia, Ghana, Guinea, Nigeria and Sierra Leone signed the ‘Accra Declaration’ which defined the objectives of the zone, as well as an action plan and institutional arrangements to ensure the speedy implementation of their decision. It is envisaged that this zone will be merged with the CFA Franc Zone to form a single monetary zone in West Africa.

At the second summit of Heads of State and Government of the zone held in Bamako, Mali, December 15, 2000 a number of important documents relating to the institutional, administrative and legal framework for establishing the zone was adopted by five countries as follows:

-         the agreement of the West African Monetary Zone (WAMZ);

-         the statutes of the West African Monetary Institute (WAMI);

-         the statutes of the West African Central Bank (WACB); and

-         the provisions on the Stabilization and Cooperation Fund (SCF);

The date for the introduction of the common currency originally set at January 1, 2003 was rescheduled in November 2002 to July,1 2005 in order to give member states more time to fully comply with the convergence criteria.

 WAMI - THE INTERIM INSTITUTION

In order to facilitate the creation of the common West African Central Bank (WACB) and the introduction of a common currency, an interim institution, the West African Monetary Institute was set up in Accra, Ghana in January 2001 and commenced operations in March 2001. 

 WAMI – THE MANDATE

The Institute is charged with the responsibility of managing the stages of implementation of the WAMZ programme for monetary union; as well as provide a platform for cooperation among the Central Banks in the West African Monetary Zone, and foster in the countries of the Zone the feeling of ownership of the eventual WACB. The implementation stages are as follows:.

–        To prepare the design and operational architecture for the emergence of the common central bank

–        To undertake the technical preparations towards the introduction of the common currency

WAMZ PROGRAMME

The Authority of Heads of State and Government of the West African Monetary Zone (WAMZ) through the Banjul Declaration of May 6, 2005 postponed the commencement of the monetary union in the WAMZ to December 1, 2009.  The Banjul Declaration not only expanded the WAMZ work programme for facilitating the emergence of the monetary union but also restructured and repositioned WAMI with the authority and without prejudice to the WAMZ agreement, to effectively deliver on her mandate.

Subsequently, the new WAMZ programme, in addition to macroeconomic convergence surveillance, is focused on other components relating to the actualization of a single economic space. These other structural benchmarks are cross cutting and include, programmes for the creation of a Customs Union in the WAMZ; Development of a zonal Payments and Settlement System to facilitate cross border trade; and Statistical Harmonization. Others are financial sector integration; ensuring an enabling environment through the ratification and domestication of WAMZ statutes and the deployment of an effective sensitization programme. There is also the need for regional development and the activation of WAMZ Institutions.

THE JOURNEY SO FAR

The proposed launching of the WAMZ monetary union was postponed twice: January 2003 and July 1, 2005. At that time member countries were faced with the challenges of meeting the agreed convergence criteria; weak and poor policy harmonization; and rudimentary payments systems. Other problems include significant variations in statistical reporting; absence of an agreement to effect a single economic space; weak sensitisation and the absence of many other institutional and structural architecture. There is also the difficulty of lack of a uniform commercial code.

Furthermore, there were concerns about the absence of capital account convertibility; the none institutionalisation of trading in member countries’ currencies; pertinent financial and trade integration issues. Also, member countries were yet to incorporate in their National laws, WAMZ Statutes and poor participation as well as weak implementation of recommendations. The following outlines some of the more recent developments in the WAMZ as a whole:

•         In recent years, macroeconomic developments in the WAMZ countries were generally favourable during the review period.  Modest growth was recorded, inflation moderated, the fiscal position improved and external sector viability enhanced.

•         On a zonal basis, three convergence criteria (fiscal deficit/GDP [excluding grants], central bank financing of government deficits, and gross reserves in months of import cover) were achieved in 2006 and 2007. The zone has sustained its performance on the convergence scale by consistently meeting three of the four primary convergence criteria since 2001, except in 2003, when only two criteria were satisfied. Although the single digit inflation continued to elude the zone, there are signs of improvement as three out of the five countries recorded single digit inflation rates in 2006 and 2007.

•         On individual country basis, The Gambia achieved four primary criteria (single digit inflation, fiscal deficit, central bank financing of fiscal deficit and gross external reserves cover). She is expected to improve on her performance on the secondary criteria from three to four by end of 2008. Ghana has consistently satisfied two out of the four primary criteria (central bank financing of fiscal deficit and gross external reserves cover), and three out of the six secondary criteria, in 2006 and 2007. Guinea complied with two out of the four criteria, namely, the fiscal deficit/GDP and the ceiling on central bank financing and one secondary criterion. Nigeria satisfied all the four primary convergence criteria, and met four secondary criteria, in 2006 and 2007. Since 2006, Sierra Leone satisfied two primary criteria, namely single digit inflation, central bank financing of fiscal deficit and gross external reserves cover. However, none of the secondary criteria was met.

•         Consistent with the action plan, WAMI produced

1.      a technical paper on the quoting and trading of WAMZ currencies

2.      Studies on inflation dynamics in the member countries

3.      a technical paper on a uniform Commercial Code

4.      the single economic space and prosperity agreement

5.      payments systems statute

6.      Standards for Automated Cheque Processing

7.      WAMZ Cheque Standard

•         Payments System Development in the WAMZ made slow progress during the year. This has received a boost with the grant of $23.5 million received from African Development Bank for the development of payments systems infrastructure in The Gambia, Guinea and Sierra Leone.

•         During 2006, the Institute, in collaboration with the ECOWAS Secretariat made progress in the development of the ECOMAC database for multilateral surveillance.

•         WAMI applied for, and received a grant from the United States Department of Trade, to finance a study on the cross listing of stocks in the Ghana/Nigeria Stock Exchanges.