The CFA was created by the colonial power of France in 1945 and it is backed by the Euro at a stable rate of CFA656. France guarantees the sovereignty of the CFA. Each country using CFA currency must keep 50% of its foreign exchange with the French Treasury.
The West African states that use CFA are 8 in number (Burkina-Faso, Senegal, Ivory Coast, Benin, Guinéa Bissau, Togo, Mali and Niger). These countries are past colonies of the French not speaking about Central Africa with 6 nations (Cameroon, Chad, Central African Republic, Republic of the Congo, Gabon and Guinéa Equatoriale) and using a rather different CFA specifically for Central Africa region governed by their central bank -the BEAC.
Let us go back to the CFA in West Africa now. The CFA is governed by the central bank BCEAO with its headquarters in Dakar. The region has more than 120million population. With the abolishment of the CFA and adopting ECO, the West Africa region will comprise 15 countries forming the ECOWAS (Economic Community of West African States) that will be bound by a single currency- the ECO and population rising to almost 400million with Nigeria contributing the highest population in number with its +200million alone.
The economic impact of this change is hoped to be felt in Africa. More trade is expected, but few things will need to be put in place. It is unclear that the current structures can handle the single currency change from CFA to ECO. Nevertheless, different protagonists in this discussion are having diverse views on the consequences and benefits of ditching the CFA. For example, some advantages are that the west African states won’t have to stock 50% of their foreign exchanges in Paris, governments will have more power to invest the revenues in their economies and therefore create more growth and jobs for its people.
When will ECO be in use: they have postponed this change over the years. However, it was believed that the ECO currency would see the light of day in 2020. Unfortunately, with the unprecedented pandemic of COVID 19, this is unlikely to happen. Once again, this will have to be pushed to a further date/year.
By: Irene Kieru - Directrice de Développement des Affaires & Marketing /Afrique Francophone