Financial Frictions and Exchange Rates in ECOWAS’s Prospective Monetary Union

The prospective monetary arrangements between the 13 countries of the Economic Community of the West African States (ECOWAS) 1 have taken center stage. The plan to create a currency union began in 2003 with the formation of the West African Monetary Zone (WAMZ), 2 which was to later merge with the West African Economic and Monetary Union (WAEMU). 3 The monetary union’s launch was initially set for 2005, but the process was postponed to 2009 and has not yet been implemented. At the center of this delay is a lack of preparedness by member states to meet the convergence criteria for inflation, official reserves, and public deficit. The West African Monetary Institute was created in 2000 to monitor compliance with the convergence criteria and organize macroeconomic surveillance within the group. The poor achievement of convergence criteria has become a stumbling block to progress towards the creation of a single currency.