End of the CFA franc, the beginning of the change for the West African franc zone

Text by: Olivier Rogez Follow

The French disengagement from the CFA, established by a law adopted in the Council of Ministers in Paris on Wednesday May 20, does not mean the disappearance of the currency in circulation in the eight countries of the West African Monetary Union (WAMU). But for these countries, a period of transition and common reflection on the future of their currency is opening.

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The CFA franc is a suspended death, and the duration of the suspension depends solely on West African countries. Indeed, Paris has just acted on its disengagement from the management of this currency. French representatives are withdrawing from monetary governance bodies such as the Central Bank of West African States (BCEAO).

The latter can now remove its foreign exchange reserves from the French Treasury safes where half was housed. The guarantee in the event of a monetary crisis - which Paris presents as all-risk insurance - does not disappear, whereby France will continue to be informed of the monetary decisions of the countries of the WAMU zone .

It is therefore a period of transition which begins. The heads of state of the eight countries concerned must first confirm the French decision and make certain adjustments, notably by revising the BCEAO statutes, since France has withdrawn its representatives. The first change therefore concerns monetary governance, such as the policy of interest rates, compulsory reserves or even the issuance of money which are now entirely the responsibility of the leaders of the zone.

Whether to keep the name of current tickets

Then you have to decide what to do with the new CFA franc. A consensus seems to be emerging not to change physical currency immediately, for two reasons at least. Indeed, the countries of the Economic Community of West African States (ECOWAS) which are not members of the franc zone are against the idea that the WAEMU countries use the name of Eco for their currency. of transition. Eco being the name reserved for the common currency of the fifteen members of the ECOWAS. If they wished, the WAMU countries could decide to baptize the CFA franc differently during this transition, but this solution, if it has the advantage of satisfying the fringe of opinion who wants to get rid of the symbols of the françafrique, is considered costly and complex to implement.

► Also read: End of the CFA franc: the steps to be taken before the eco comes into force

"  It would take at least three years to achieve this , explains the Senegalese economist Moubarack Lô, the time to find a name, print, distribute the new denominations and remove the old ones.  He believes that such an operation would not do much since the ECOWAS maintains his idea of ​​a common currency. Initially, therefore, the CFA franc will continue to circulate within the WAMU, without any change for the households and consumers concerned.

How long will it last? "  Everything will depend on the willingness of the ECOWAS countries to reach the Eco  ", answers Moubarack Lô. For the time being, Nigeria is reluctant to embark on a common currency until economic convergence between countries progresses. This is the reason invoked last February for its request to postpone the start-up of the Eco. In addition, some of its neighbors fear that due to the economic weight of Nigeria, the future Eco is a Naira (currency in circulation in Nigeria) in disguise.

Towards an Eco for central banks only?

Faced with these contradictions and divergences, the implementation or not of the Eco is a bone of contention which threatens the very cohesion of the ECOWAS. The fifteen could, at first, opt for an intermediate solution, suggests Moubarack Lô “  which would consist in creating an Eco for exchanges between central banks of the ECOWAS. This solution would have the advantage of advancing the question of the Eco and therefore of preserving the cohesion of the Community, while sparing those who do not want to go too fast towards the adoption of a common currency  ”. Moubarack Lô, advisor to the Senegalese Prime Minister, clarified that this proposal does not reflect the official position of the state of Senegal.

► To read also : End of the CFA franc: the eco in small steps

Pending the arrival of the Eco, the countries of the WAMU zone now have their monetary destiny in hand. While it is unlikely that the current proven stability policy, particularly in the fight against inflation, will be the subject of major upheavals, some economists nevertheless recommend that the CFA be quickly tied to a basket of currencies and no longer just the euro in order to "  introduce controlled monetary flexibility  ", to use the expression of Togolese economist Kako Nubukpo.

Freed from French monetary supervision, the actors and economic decision-makers of the WAMU know that they can now tackle without complex questions which, even yesterday, were taboo.

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