IMF Warns Against Single Currency in W/Africa, A Letter to the Editor By Thomas C. Dawson, Director, External Relations Department, IMF
February 6, 2003IMF Warns Against Single Currency in W/Africa
A Letter to the Editor
By Thomas C. Dawson, Director
External Relations Department
International Monetary Fund
Published in This Day
February 6, 2003
Your recent articles about an IMF research paper on monetary union in West Africa ("IMF Warns Against Single Currency in W/Africa", Jan. 16; "Blackmail Won't Stop Single Currency", Jan. 17) unfortunately assume that a Fund Working Paper represents IMF policy. It does not. The paper cited in both articles, like all IMF Working Papers, contains a prominent disclaimer that its views are those of the authors and "do not necessarily represent those of the IMF or IMF policy."
In fact, neither the IMF Executive Board, which represents the views of the Fund's 184 member countries, nor Fund staff responsible for Nigeria have drawn the conclusions referred to in your articles. (Actually, a careful reading of the Working Paper would show that your articles did not accurately reflect its broad message, which stresses that a West African currency union could be beneficial for all participating countries, but only if fiscal discipline is achieved and sustained.) The Executive Board's most recent discussion of the Nigerian economy, summarized in an IMF Public Information Notice released on Jan. 2, did express concern about the country's expansionary spending policies. The Board also urged the government to take further steps to establish a single, unified foreign-exchange market for the naira. However, the Board did not comment on the issue of the proposed West African currency union or Nigeria's possible membership in it.
The related IMF staff report about the economy, released on Jan. 3, did state that fiscal discipline and unification of the naira foreign-exchange market would need to be achieved "before Nigeria would be in a position to join the proposed West African Monetary Zone." And the staff report cited the agreement of Nigerian officials that "these issues will have to be addressed" before any decision that the country should join the proposed zone. But again, there was no judgment on the currency union plan.
Indeed, a decision by any IMF member countries to join a currency union or to adopt any other exchange rate arrangement is a question of national sovereignty. The IMF role in that process is limited to providing the technical assistance and policy advice needed to support that decision. That is exactly the role the Fund has played in the case of the CFA franc and the euro.
The Public Information Notice on Nigeria and the related staff report are both available on the IMF website (www.imf.org). I would encourage the readers of This Day to read them to obtain a better understanding of the IMF's real views on Nigeria.