NEW YORK—The monetary integration of the Economic Community of West African States (ECOWAS) has become an exercise in perpetual postponement: more than four decades after it first made moves to establish a common currency, the bloc has yet to achieve its goal. Plans to introduce the eco, as the currency will be called, in 2003 were repeatedly delayed, mainly because members failed to meet the macroeconomic convergence criteria simultaneously and consistently.
ECOWAS leaders are now pursuing a phased approach, in which only countries that meet the convergence criteria will participate in the initial rollout planned for 2027. While this can help maintain momentum without compromising macroeconomic discipline, it fails to account for the fact that many of the forces driving economic instability in member states are beyond the control of national authorities. Even when governments maintain prudent policies, external financial conditions can cause substantial divergences within ECOWAS—such as when a sharp rise in global interest rates increases borrowing costs and debt-service payments.
That is why the bloc must focus on creating a system of fiscal federalism, including developing adjustment mechanisms and strengthening institutions that smooth shocks, foster solidarity, and promote long-term stability. Such a system is essential to ensure the sustainability of a shared monetary policy.
Many factors complicate the quest for macroeconomic convergence. Consider exchange-rate movements: during the US Federal Reserve’s post-pandemic tightening cycle, many African countries’ currencies depreciated sharply. The Nigerian naira—the currency of the bloc’s largest economy—depreciated by more than 50% at the peak of the adjustment period, sharply increasing the domestic-currency cost of external debt and imported goods, and setting in motion a negative feedback loop of exchange-rate weakness, inflation, and fiscal stress.
Moreover, macroeconomic convergence is a dynamic process: meeting convergence criteria at one point does not guarantee that compliance will last. The monetary integration of ECOWAS member states—with their large differences in export diversification, productivity, industrialization, fiscal capacity, and financial-market development—requires mechanisms to help them return to convergence after divergence. That is precisely what fiscal federalism offers.
With a stronger ECOWAS fiscal framework, member states could pool elements of their fiscal responsibilities while retaining core aspects of national sovereignty. A regional fiscal authority could set common rules, coordinate taxation, mobilize regional revenues, finance cross-border infrastructure, and operate stabilization mechanisms. The resulting risk-sharing would make the eventual loss of independent monetary policy and exchange-rate adjustments considerably less disruptive.
Instead of beginning with a common currency and then developing the underlying fiscal framework, ECOWAS should prioritize fiscal federalism over monetary integration. This sequence would bolster the bloc’s ability to respond collectively to external challenges and help it create the institutions and solidarity needed for monetary integration. As member states became familiar with common fiscal regulations, regional transfers, shared financial institutions, and coordinated macroeconomic management, the political and economic costs of harmonizing monetary policy would likely fall. This is crucial in a region where some countries maintain flexible exchange rates while others use the CFA franc, which is pegged to the euro.
Such an approach could also help solve one of the fundamental weaknesses of ECOWAS’s monetary-integration project: the lack of a robust mechanism to address asymmetric shocks, which raise the risk of procyclical behavior and undermine policy coherence. The bloc’s economies are vulnerable to these shocks because of their varying degrees of dependence on commodities and energy imports, coupled with their diverse production structures.
A common fiscal capacity could redistribute resources to economies experiencing temporary distress. Equally important, it could also finance countercyclical investment in productive capacity and cross-border infrastructure, thereby boosting the bloc’s resilience, reducing disparities among member states, and promoting regional integration and convergence. This, in turn, would bolster short-term demand, mitigate the effects of economic downturns, and reinforce long-term economic strength during periods of external weakness.
ECOWAS is also contending with highly fragmented domestic-capital markets. As a result, small, illiquid sovereign-debt markets leave member states exposed to the “original sin” of borrowing in foreign currencies and impede the development of reliable yield curves. Fiscal integration would establish the scale, liquidity, and institutional infrastructure required for a more dynamic, development-oriented regional financial market. By gradually implementing common benchmarks across maturities and making the cost of capital more transparent, such a market could help create the conditions for channeling domestic savings into regional investment opportunities.
Lastly, the inherently incremental nature of fiscal integration may make monetary integration less politically threatening. Whereas monetary integration requires a conspicuous transfer of sovereignty, with governments relinquishing control over their currencies and monetary policies, fiscal integration can be implemented progressively, with economic benefits accruing gradually.
In its current form, ECOWAS’s monetary integration represents a leap of faith. When paired with fiscal federalism, however, it could become a steady process of institutional convergence that delivers enormous economic and social dividends. It could also advance the African Union’s Agenda 2063, which seeks to deepen the continent’s economic integration, including through continental financial and monetary institutions.
In today’s increasingly polarized geopolitical landscape, shaped by zero-sum mindsets and marked by a shift toward monetary multipolarity, ECOWAS has an opportunity to model the kind of coordination needed to deliver continental monetary integration, which is becoming ever more critical to Africa’s future growth and development. It just needs to put first things first.
Copyright: Project Syndicate, 2026.
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