The bill ratifying the end of the CFA franc was adopted this Wednesday, May 20 in the Council of Ministers by the French government. This text formally validates the transformation of the West African currency which will change its name to be called the eco. This is a new step after the announcement made on December 21 by Emmanuel Macron and Alassane Ouattara.
The reform concerns eight member countries of the West African Monetary Union: Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo. It has been in the pipeline for at least three years and was able to succeed after long negotiations between France and the countries concerned during the last half of 2019.
What will change first is the name of the currency. The CFA franc will become the eco. But the real change in depth is the breaking of “technical” ties between the countries concerned, the Treasury and the Banque de France. France will no longer co-manage the West African currency with the states concerned.
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Another change is that the Central Bank of West African States will no longer have to deposit half of its foreign exchange reserves with the Banque de France. This obligation was seen as a humiliating dependence on France by all those who worked for this reform. France will also leave all the decision-making and management bodies of the WAEMU. But Paris will continue to offer guarantees in the event of a monetary crisis.
The process is only at its beginning
For the time being the eco will always be linked to the euro with a fixed parity which guarantees the same value of the currency for consumers. Paris is basically moving from a co-manager role to a guarantor role, but in practice this will not change anything in the daily lives of consumers.
There are still many steps and questions. When will the new tickets be printed? When will they take effect? You will probably have to wait to hold on an eco in your hands, maybe even several years.
It will take even longer for the former franc zone to rally the other ECOWAS countries to build a single currency. In the Cédéao zone, some do not see this reform especially Nigeria.
Central Africa, a separate monetary area
The economic giant does not belong to the franc zone, it manages its own currency, the naïra. And like other English-speaking countries in the region, Nigeria is cautious and demanding. These countries which are taking part in the reflection on a single currency in the Cédéao zone, put forward in order to move towards this currency criteria which few States can meet.
Note that this reform does not currently concern the six Central African countries which also use the CFA franc. They are in a separate currency area and are in another regional dynamic. However, the debate has already started.
Read also: The French government adopts the bill confirming the end of the CFA franc