US$ 23 Million AfDB Grant for Development of West African Monetary Zone
Tunis, 5 August 2008 - The African Development Bank (AfDB) Group and the West African Monetary Institute (WAMI) on Monday, in Tunis, signed a grant agreement of 14 million Units of Account (UA*), equivalent to US$ 23 million, to finance the West African Monetary Zone Payment System Development project, which aims at creating a single currency in the sub-region by standardizing the payment systems in The Gambia, Guinea and Sierra Leone.
The Agreement was signed by the Bank Group’s Vice-President for Sector Operations, Zeinab B. El-Bakri and the Director-General of WAMI, Temitope W. Oshikoya.
The project is an important regional financial infrastructural requirement for implementing the West African Monetary Zone (WAMZ) by upgrading the payment systems in the three countries to the same level as those in Ghana and Nigeria, with a view to facilitating the harmonization of the payment systems in five of the six member countries of WAMZ.
Speaking at the event, Mrs. El-Bakri noted that the project will help the three countries "enhance the performance of their financial systems and improve their general economic efficiency" as well as "finance the initial stages of financial integration that will catalyze the process for West African Monetary Zone promoting regional integration."
For his part, Mr. Oshikoya expressed WAMI’s appreciation to the Bank. He said that the agreement "marks another major leap in our march towards a Monetary Union and a significant step in the establishment of a robust, safe and efficient payments system that can act as a model for the African continent in general and West Africa, in particular".
The main component of the project is the development of Real Time Gross Settlement (RTGS), a large value funds transfer system whereby financial intermediaries can settle inter-bank transfers continuously and in real time for their own account as well as the accounts of their customers in the three countries. The implementation of RTGS is expected to enhance the establishment of a West African Central Bank (WACB), which will, in turn, implement a regional RTGS system that will link the national RTGSs in its member countries in a "system of systems".
The estimated cost of the project is UA 17.56 million. The ADF grant accounts for 79.7% of the total cost. The central banks of the three countries will, together contribute UA 1.62 million or 9.2% of the project cost in local currency, while the estimated contribution of the commercial banks in the three countries is UA 1.9 million or 11.1%. The commercial banks’ contribution represents the investments that they will require to make in their respective offices in order for the new payment systems to operate effectively.
WAMZ was created in 2000 by The Gambia, Ghana, Guinea Nigeria and Sierra Leone, with the primary objective of promoting economic integration and trade in the zone. The goal was to create a single economic space in the Zone by December 2009 through the establishment of a monetary union and the adoption of a single currency. The establishment of WAMZ was in line with the broader goal of creating a single monetary zone in the whole of West Africa as proposed in the ECOWAS Monetary Cooperation Program (EMCP) adopted in 1987.