Eco (currency) facts for kids

Kids Encyclopedia Facts

The eco is the name for a new common currency that countries in West Africa hope to use. These countries are part of a group called the Economic Community of West African States (ECOWAS). Imagine if all the countries in a big region used the same money! That's the goal of the Eco.

Right now, some West African countries use a currency called the CFA franc. This money is linked to the Euro. The plan is to either change the CFA franc into the Eco, or have other countries start using the Eco first. Eventually, all ECOWAS countries would use it. This would help these countries become more financially independent.

This map shows countries using the West African CFA (green), the West African Monetary Zone (red), and Cabo Verde (blue).

How to Get the Eco: The Rules
- Main Rules for Each Country
- Other Important Rules
History of the Eco Currency
See also

How to Get the Eco: The Rules

For the Eco to become real, countries need to meet some important rules. These rules are called "convergence criteria." They were set by the West African Monetary Institute (WAMI). There are ten rules in total: four main ones and six secondary ones. By 2011, only Ghana had managed to meet all the main rules in one year.

Main Rules for Each Country

Keep inflation (how fast prices rise) low, with a single-digit rate each year.
Make sure the government's fiscal deficit (spending more than it earns) is small, no more than 4% of the country's total economic output (GDP).
The central bank should not lend too much money to the government, no more than 10% of the previous year's tax money.
Have enough foreign money saved up (gross external reserves) to pay for at least three months of imports.

Other Important Rules

Governments should not create new unpaid bills and should pay off old ones.
Tax money collected should be at least 20% of the country's total economic output (GDP).
The money spent on government salaries should be no more than 35% of the tax money collected.
Money spent on public projects (like roads or schools) should be at least 20% of the tax money collected.
The country's money should have a steady value compared to other currencies.
Interest rates (the cost of borrowing money) should be positive after considering inflation.

History of the Eco Currency

The idea of a common currency in West Africa has been around for a long time.

Before 2019

The goal of a common currency was first officially stated in December 2000. This was for countries in the West African Monetary Zone (WAMZ), which include Gambia, Ghana, Guinea, Liberia, Nigeria, and Sierra Leone. The plan was to then expand it to all ECOWAS countries.

The Eco was first planned for 2003, but this date was moved many times: to 2005, 2010, and 2014. Because of a big global economic crisis, the start was moved again to 2015. In 2009, they also planned to merge the Eco with the CFA franc by 2020.

In 2001, the West African Monetary Institute (WAMI) was set up in Accra, Ghana. It's like a practice organization for a future West African Central Bank. WAMI helps the central banks in the WAMZ prepare for the new money, similar to how the European Monetary Institute prepared for the euro.

By 2012, it was clear that most countries were not meeting the rules for the Eco. The overall progress was described as "dismal," meaning very bad. However, leaders still said they were committed to creating the Eco. In 2018, ECOWAS again said they wanted to launch the Eco in 2020, but experts noted that not enough work had been done to make it happen.

2019: The Name "Eco" is Chosen

On June 29, 2019, the leaders of ECOWAS officially chose "eco" as the name for their single currency project. They still aimed to introduce it in 2020.

In December 2019, ECOWAS leaders met again. It was reported that only Togo was meeting the main requirements for the new currency.

On December 21, 2019, the President of Ivory Coast, Alassane Ouattara, announced a big change for the West African CFA franc. It would be renamed the Eco. Also, France would no longer manage the currency directly. However, the Banque de France would still help make sure the Eco could be easily exchanged for the Euro at a fixed rate. This change was expected by the end of 2020.

The International Monetary Fund (IMF) welcomed these changes, calling them a "key step" in modernizing the money system between West African countries and France. The President of Equatorial Guinea, Teodoro Obiang Nguema, also hoped for similar changes for the Central African CFA franc. On December 29, 2019, the President of Ghana said his country wanted to adopt the new Eco.

2020: Disagreements and Delays

In January 2020, Nigeria stated it had five "non-negotiable terms" for joining the Eco. These included ending the practice of depositing part of the currency's foreign money reserves in the French Treasury. Nigeria also wanted ECOWAS itself to manage the Eco, and for the money to be printed in Africa, not France.

Sierra Leone announced it would decide on the Eco soon. Its central bank said the country would keep using its own money, the Leone, until an ECOWAS meeting on January 16, 2020.

On January 14, 2020, central banks in the ECOWAS region met to discuss the Eco. They also talked about the announcement from French-speaking ECOWAS countries to rename the CFA franc to Eco.

On January 16, 2020, Nigeria and several other West African countries, especially English-speaking ones, said that renaming the CFA franc to Eco was "not in conformity" with the plan for a single currency for the whole region. They felt this was a one-sided decision. These countries stressed that all ECOWAS members should stick to the agreed plan for the single currency. This disagreement showed a leadership struggle between Ivory Coast and Nigeria.

On January 31, 2020, Ivorian President Alassane Ouattara clarified the situation. He pointed out that only five out of fifteen ECOWAS countries attended the meeting where the renaming was criticized. He said it was a meeting of ministers, not heads of state. He insisted that the heads of state still wanted the Eco by 2020, but only if countries met the financial rules. He suggested a gradual approach, where countries that meet the rules could start first, and others could join later, similar to how the Eurozone grew.

In February 2020, Nigeria's foreign minister said that Nigeria's position had not changed. Nigeria believed that most countries were not meeting the rules, so the deadline for the Eco should be extended.

Later in February 2020, an ECOWAS summit took place. The leaders were happy with the progress made by the West African Economic and Monetary Union (UEMOA) on the single currency. They saw the reform of the CFA franc as a step towards the Eco.

A report published in February 2020 looked at the plan for the Eco. It said that keeping the Eco linked to the euro and having France guarantee its value would help maintain trust in the new currency. This guarantee had helped keep inflation low in the UEMOA region. The report also said that extending the Eco to all fifteen ECOWAS members seemed unlikely in the medium term. This was partly because of Nigeria's large economy and its trade policies. Also, extending France's guarantee would need approval from the Council of the European Union and the European Central Bank.

On May 20, 2020, the French Council of Ministers adopted a bill. This bill meant that the Central Bank of West African States would no longer have to deposit half of its money reserves with the French Treasury. Also, France would no longer be part of the Central Bank's governing bodies. This bill needed approval from the French Parliament. If approved, the Eco was expected to start in July 2020. France would still guarantee a fixed exchange rate between the Euro and the West African CFA franc.

However, because the French Parliament would not approve the bill until September 2020, the Eco's launch would not happen before October 2020. In September 2020, President Alassane Ouattara announced that ECOWAS leaders decided to implement the Eco "within three to five years."

2021: New Target Date

In June 2021, the ECOWAS Heads of State adopted a new plan for the Eco. They announced that the common currency is now planned to be launched in 2027.