Despite the announced death of the CFA franc, the eco is not yet born

The CFA franc has sparked tensions in West Africa over the creation of a single currency.

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Will the eco one day be the single currency of all of West Africa or will it remain at best only an avatar of the CFA franc? When will it appear on the labels and in the wallets of this region which has nearly 400 million inhabitants?

 As the reform supposed to lead to the disappearance of the CFA progresses, the differences between the eight countries of the franc zone and the group gathered around Nigeria threaten to reduce the ambition or even to bury this project.

On December 21, 2019, in Abidjan, Emmanuel Macron and his Ivorian counterpart Alassane Ouattara had created surprise and a stir by solemnly declaring the end of the CFA franc and its rapid replacement by the eco. The announcement was part of an overhaul of monetary relations between Paris and the eight countries of the West African Economic and Monetary Union (UEMOA), which are Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo.

A political coup both for France, eager to free itself from this colonial legacy, and for African leaders, anxious to break the cliché of eternal vassals.

Since then, Paris has accelerated the implementation of this highly symbolic project. The bill ratifying the reform was adopted at the end of May in the Council of Ministers. 

According to the text, the Central Bank of West African States will no longer be required to pay 50% of its foreign exchange reserves into an account housed with the French Treasury, a mechanism that was experienced as a humiliating dependence.

Nigerian President's Criticism

Next, France should withdraw its representatives from the currency management bodies. "Parliament should ratify this treaty by the fall, but we will try to implement it faster, in advance," said a French source familiar with the negotiations.

Everything would be for the best if, on the one hand, the French and Ivorian leaders, followed by most of the French-speaking countries of West Africa, had not given the impression of taking the seven other members of the Economic Community of West African States (ECOWAS) and if, on the other hand, Nigeria, the region's economic hyperpower, played the game of monetary integration.

The reform, annoyed dissatisfied, confiscates the name of the eco, initially intended to be the currency of the fifteen members of the ECOWAS, and maintains a fixed parity with the euro as well as the guarantee of convertibility by France, unlike to the roadmap validated in summer 2019.

On June 23, Muhammadu Buhari, the president of Nigeria, released a new round of criticism on Twitter by expressing his "feeling of unease that the UEMOA zone wishes to take up the eco by replacing its CFA franc before the other member states of the Cédéao ". "It is worrying that people with whom we want to join a union are taking important steps without trusting us to discuss it,  " he said.

Delaying manoeuvres

Playing the role of a firefighter, George Weah, President of Liberia, called, in the process, to the creation of a "special committee" to discuss with the other party, deeming that the only way out of "the impasse current is to promote a dialogue between the French and English speaking blocks ”. A task that promises to be particularly difficult.

"Buhari's comments are useless and violent," replied a member of the Niger presidency, very involved in the reform. Nigeria does not want the single currency. It has for years radically blocked any process which would force it to a budgetary discipline to which we are accustomed within UEMOA. "

The English-speaking neighbour is accused of multiplying delaying tactics. “In 2017, remembers the Nigerien official, the United Nations told us the measures to be taken to comply with the convergence criteria. However, Nigeria rejected the findings on the pretext that the data was incorrect, although it and the IMF had provided it. It wasted six months. "

Why would Nigeria refuse a monetary union? 

The country, which represents 70% of the ECOWAS GDP and more than half of its population, would then be in a position of strength. Only, the reform as it was thought until then would force Abuja to no longer cause the naira to fluctuate based on oil prices, to control its inflation and to keep its public deficit below 3%. Requirements to which the English-speaking giant, who has refocused on a national agenda since the election of Mr Buhari, is not ready to comply.

"Money doesn't like noise"

However, for most Francophone leaders, the transition should not be at the expense of monetary stability. Alassane Ouattara, in particular, "will never accept that inflation comes to thwart development efforts and impoverish the populations," insists a minister close to the Ivorian president. Everyone will have to comply with this discipline which has made the CFA franc a credible currency. We do not want controversy, but we have no moral lesson to receive.

"The currency does not like noise", abounds another Ivorian official, insisting on the "  gradual" nature of the accession process which in no way prevents the States from joining the eco when they respect the convergence criteria, but also on the possibility of pegging it to currencies other than the euro.

Manoeuvring in the enterprise of the disappearance of the CFA franc, Paris is now trying to be invisible in the conflict surrounding the birth of the eco. "On the name, the design of the currency, it is up to the African States to decide, France has nothing to do with this," slips the French source previously quoted.

Was Paris and Abidjan wrong to force the monetary destiny of the region? "Basically, Buhari is right: a decision had been taken in fifteen countries and we see that eight of them are going very fast, on the basis of principles which are not those on which we had agreed, judges Togolese economist Kako Nubukpo, known for his anti-CFA franc positions. What is needed now is to take advantage of the treaty between France and the WAEMU countries to announce the action plan for the future: are we going to move towards a flexible exchange rate? What do we want to do with the French guarantee? "

"Not before ten years"

The status quo, he believes, would suggest that it is impossible to sever ties with the former colonizer, at the risk of interrupting regional integration projects.

“The problem is that the countries in the CFA zone wanted to respond to the political pressure that was exerted on them by adopting the eco when the two questions are separate. This created confusion. In addition, Nigeria is not assuming its leadership role, ” analyzes economist Gilles Yabi, founder of the Wathi think tank. 

According to him, the wave of elections which is announced in West Africa (Ivory Coast, Guinea, Burkina Faso, Niger) should inevitably delay the process. A new uncertainty was added with the brutal death, Wednesday, July 8, of Amadou Gon Coulibaly, Ivorian Prime Minister and especially dolphin of Alassane Ouattara for the presidential election of October. In this maelstrom, what will happen to the eco? "It would be very bad for the future of this currency that it is accompanied by announcement effects that are always postponed," he warns.

Convenient pretext to justify the absence of a clear agenda or admission of helplessness in the face of an unforeseen event that still blurs the outlook, two ministers of member countries of UEMOA agree that the passage of the coronavirus on the economies of the region has come undermine compliance with the convergence criteria. "  In any case, we are only at the beginning of a long process which will certainly not be completed for ten years", concludes one of them.