Nigeria and Ghana, which are considered the two reliable drivers for the implementation of the single currency (ECO) within the ECOWAS, are going through difficult times due to the current international conjuncture. Rating agencies Moody’s and S&P Global Ratings have both either downgraded or maintained the outlook on their sovereign ratings to negative.

The two West African countries are severely affected by the crash in crude prices, not only at lower a level than expected but also at historically low levels. For Ghana, the international conjuncture means huge strains on forex buffers. Although the country mobilized $3 billion early this year and more recently $1 billion from the IMF, its balance of payments is likely to suffer from capital repatriations from non-residents causing a depreciation of the local currency with risks of inflation.

For Nigeria, it has been noted that the naira, which at the end of March 2020 had already been devalued by 17% by the Central Bank, was trading at 498.5 against the US dollar on the non-deliverable foreign exchange market. This market is generally used by companies to protect themselves from the likely fluctuations in exchange rates between currencies.

It is not certain that this level of depreciation of the naira will be confirmed shortly. In March this year, the Central Bank of Nigeria predicted that a sharp depreciation of the currency would affect the country's ability to repay foreign currency debt and in that case, a contraction in public spending on capital and social infrastructure becomes highly inevitable.

The current oil price situation does not bode well for the two countries. Oil is Nigeria's main source of foreign exchange income and Ghana's second-largest export after gold. The current situation has revealed the structural weaknesses of these two countries which are often presented as essential pillars in the construction of the ECOWAS single currency project.

Even without the covid-19, the external position of the two countries was already a cause for concern especially that of Nigeria, which is also the leading economy in Africa in terms of GDP. Given the current situation, their performance on the convergence criteria necessary for their adoption of the ECO has deteriorated sharply.

Idriss Linge