Francs for the memories, but will the eco make any difference?
The CFA franc is being replaced in the Waemu region by the 'eco'. But will the benefits of this move be worth the bemusement it is causing elsewhere in Africa?
Economists and currency watchers were caught unawares on December 22 by sweeping revisions to the west African CFA franc, in response to increasingly heated protests across the region in recent years.
Under changes announced in Côte d’Ivoire by president Alassane Ouattara and his French counterpart Emmanuel Macron, the currency – used in the West African Economic and Monetary Union region, or Waemu, by Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo – will be renamed the ‘eco’ later in 2020.
Countries using the new currency will no longer need to deposit 50% of their foreign exchange reserves in the French Treasury, with France no longer providing a representative on the currency union’s board.
Mr Ouattara described the move as a “historic day for west Africa” (the other CFA franc, in use by six central African countries, is so far unchanged); indeed, the move has significant political ramifications, as Mr Macron continues to work through France’s colonial legacy in the region. Dropping the CFA tag (the acronym originally standing for Colonies Françaises d'Afrique – or 'French Colonies of Africa' – at the currency’s birth in the 1940s before being altered), as well as the perceived oversight from Paris, is likely to resonate politically across the region.
Practically speaking, however, it is a case of, to paraphrase The Who's Pete Townshend: “Meet the new eco, same as the old franc.” The eco’s value will remain pegged to the euro, with Paris continuing to guarantee convertibility of the eco to the euro, effectively working as an overdraft facility if the region’s reserves become dangerously depleted.
While many of the region’s businesses will no doubt happily carry on using a very similar currency, the new moniker itself has not gone down well across the wider African region. The 15-strong Economic Community of West African States (Ecowas), after several years of delay, announced in June 2019 details of its new currency, which it also hopes to launch this year. Its name? The eco. Backers of the Ecowas eco, particularly Nigeria, are not amused at the Waemu region's choice for a new name, which is likely to further complicate adoption of a common currency across the wider region.
