West African CFA franc currency banknotes and coins sit in this arranged photograph in Dakar, Senegal, Jan. 11, 2015. (Photo by Getty Images)
BY AHMET KAVAS
One of the first details given about countries is their currency. In this sense, many African countries draw attention as the traces of colonialism are still visible in more than half of the continent.
Currently, there are 54 independent states and 41 different currencies on the continent. A total of 14 countries have two separate currencies which are printed and protected by the Bank of France – called the CFA franc. While the West African CFA franc is used in eight West African countries, the Central African CFA franc is used in six Central African countries
The first one is valid in the economic Community of West African States (ECOWAS) while the latter is valid in the Central African economic and Monetary Community (CEMAC). However, their circulation is not possible between the two regions.
The currencies of Burundi, Djibouti, Guinea, Comoros, the Democratic Republic of Congo and Rwanda are called “francs,” such as the Djibouti franc.
In addition, Kenya, Somalia, Tanzania and Uganda use the “shilling,” a term inherited from the British colonial era, while Liberia, Namibia and Zimbabwe use the term, “dollar.”
In Mozambique, a former Portuguese colony, the metical is used. A “euro” is in circulation in Mayotte and Reunion, which are considered to be islands of the African continent, as their French colonial status continues. There are 18 different units in Africa when it comes to local currencies.
Currencies in French colonies
In the 19th century, France colonized many regions in Africa and Asia and imposed new currencies in the regions in the 1940s. France chose that tactic as a way to make its colonial presence permanent.
However, it couldn’t escape from the reactions in the region. The Kingdom of Morocco adopted the currency of “dirham” in 1955, while Tunisia adopted “dinar” a year later.
On the other hand, the “Guinean franc” was in circulation in 1960, while the “Mali franc” entered into use in 1962.
Algeria was perceived as a part of France. That’s why it was called “New France” and the French franc was used in the country.
After its independence in 1962, however, the country adopted the “dinar” as its currency.
Although Madagascar introduced its own currency, “ariary,” in 1963, it was only able to put an end to the use of the CFA franc in 1973.
Mauritania also continued on its way in 1973 with the “ougiyya” currency.
Mali returned to the CFA franc in 1984. In 1985, the first Portuguese colony, Equatorial Guinea, adopted the CFA franc. Guinea Bissau followed this pattern in 1997 and joined the union.
Resistance to France
The CFA franc is now about to mark its 75-year anniversary. Just after the independence days, 82% of the export revenues of the African countries were kept in the French Bank.
Later on, this rate was reduced to 60% and finally to 50% in 2012 with increasing pressure.
It was perceived as a humiliating attitude in terms of their society. Politicians, economists and especially new generations emphasized the issue in regard to the underdevelopment of the region.
When it was first put into circulation on Dec. 26, 1945, the first letters of the words of the African French Colonies Franc (Franc des Colonies Françaises d’Afrique) were abbreviated as the CFA franc to be used in the colonies of the western and central regions of Africa.
In 1960, the two words in the three-letter abbreviation were replaced with new ones. It was now called the African Finance Community Franc (Franc de la Communaute Financiere d’Afrique) in the west while it was the African Finance Cooperation Franc (Franc de la Cooperation Financiere d’Afrique or F CFA) in the inner part of the continent.
During the past 60 years, countries where this was imposed have struggled to fix the situation. They were also uncomfortable that they were subjected to a serious follow-up process, as the transfer of money to the other party in purchases can only be made through banks.
Moreover, the introduction of counterfeit currencies, destabilization of economic life, political pressures in each country and military coups were seen as games played to keep “the F CFA” in circulation.
France implemented a similar practice for its colonies in Southeast Asia. In Indochina, the Pacific French Colonies Franc (Franc des Colonies Francaises du Pacifique – F CFP) was in circulation.
The exact expression of the currency was changed to the Pacific Financial Community franc (Franc de la Communaute Financiere du Pacifique) in 1954.
However, the countries in this region that got their independence adopted currencies such as the Vietnam “dong,” Laos “kip” and Cambodia “riel.”
Eco in circulation
A need to rename the CFA franc emerged. For the first time, ECOWAS members took the final step toward this in May 2019. The following June, they decided to name the currency “eco.”
However, they also knew that it was impossible to abolish such a well-established currency by a decision.
A serious structuring process was required to bring the eco into circulation. In the political sense, it was important to involve the will of the opponents, economists and each group of respective societies as well as the ruling parties.
Besides, it was also fundamental to prepare the economic structure. Moreover, a schedule was needed to handle a vital issue.
On the other hand, Nigeria, which is not among the countries using the CFA franc and has a currency called “naira,” must be among the 15 countries that will use the eco.
However, it was a fact that Nigeria did not intend to engage in the process.
Although Paris would not manage the new currency, its existence as a guarantor brought various reactions.
More importantly, just a few argue that the transition to the new currency will be a different process for consumers.
While their suffering from the CFA franc, which did not contribute to their welfare, was obvious and their poverty never ended, a sudden change in their lives was not expected anyway.
In the United Nations Development Programme’s (UNDP) Human Development Index (HDI) in 2016, 10 of the 14 countries that use the CFA francs were among the lowest-ranking 25 countries.
Again, the fact that the six countries that use the CFA franc were among the lowest 25 countries in the International Monetary Fund’s (IMF) gross domestic product (GDP) ranking was interpreted as France having had no intention of developing these countries.
Although they all are on the same continent, the CFA franc countries are behind the ones using English and Arabic currencies.
Furthermore, just as it is hard to imagine the eurozone without Germany and France, the idea is that Nigeria and Ghana are vital for the eco region.
There are opinions that this change will not be very effective without a trade union agreement between these 15 countries. So, the percentage of trade made among themselves must be increased.
Another issue that has been criticized regarding the process is that France is the guarantor for the eco against the euro. A fixed rate was set for 1 euro, as in the CFA franc, that would keep the parity of the new currency. In other words, 1 euro will be equal to 650 eco.
At this point, all the negative aspects of the CFA franc will be put aside. But the transition to this practice is not the result. On the contrary, it is the beginning of an end. Otherwise, it will take time to print the necessary banknotes.
Regulations for transition
According to Nathalie Goulet, a member of the French Senate, the CFA franc regulation is just a cosmetic operation. In her view, it is only a matter of changing the external appearance of the vehicle whose engine is protected.
The joint action of countries in the monetary union is a long-term process rather than just a one-night arrangement.
In the case of the European Union, the transition to a common currency took many years. It entered into circulation in 2002 after requiring serious preparation.
Parliaments, public opinion and nongovernmental organizations (NGOs) of the relevant states in West Africa need to evaluate this process in all the details.
There are concerns that this process, which is initiated in a hurry, cannot yield a concrete outcome. No state has examined this issue in-depth in its parliament.
The French Parliament is the last parliament on Earth to manage the process. It is another discomfort that the CFA franc countries are perceived as passive components.
According to Jean François Mbaye, a deputy of French President Emmanuel Macron’s ruling party La Republique En Marche (LREM), who responded to the heavy criticism of the transition to the eco, this regulation is only a first step and should not be perceived as the end of the process.
The prominent thing here is to put down the first stone. France, on the other hand, wants to protect its interests.
The issue, however, was not followed closely in the French Parliament. Only 73 of the 577 deputies in total attended the talks. Fifty-seven deputies, one-tenth of the total, voted in favor of using the eco, while eight deputies voted against it.
The acceptance of the eco will not go beyond relieving the hands of those who have a say in the foreign-dependent economies in the CFA franc region and those who invest in the euro.
Jean-Paul Lecoq, a communist deputy in the French Parliament, has serious criticisms on the issue.
According to him, this arrangement was carried out by a network established between Paris and Abidjan, the economic capital of the Ivory Coast.
Suspiciously, it does not seem meaningful that France signs this agreement before the relevant countries and asks them to follow her.
There are even those who perceive this as humiliation. There is also a rumor that other countries had no information about Macron’s visit to West Africa to arrange a new currency in 2019.
In short, there are criticisms that France will not leave the region alone.
Despite everything, the public opinion of France may be silenced. However, it is a fact that imposing the eco on all ECOWAS members will also weaken the integration process of the region and bring negative effects on the whole continent. The imposing attitude of France seems to increase the attitude toward itself.
In with the new
The French Parliament approved the transition to the eco on Dec. 10, 2020. Initially, the eco currency, rather than the CFA franc, which entered circulation in December 1945, will be officially in usage in a limited number of countries.
France has now officially confirmed its withdrawal from the Central Bank of West African States (BCEOA) administration. Furthermore, countries in the CFA franc region will no longer need to deposit 50% of the amount they obtain from their exports to the Bank of France in exchange for 0.75% interest.
The French finance minister and central bank governor will not be able to attend the BCEOA meetings, one in Paris and the other in a CFA franc country.
Issue of guarantee
Why does France want to be a guarantor or is given this responsibility? The main reason is that the multinational companies in the region want to ensure their existing investments.
Another reason is that the elites in the region secure their own interests.
France is perceived as armor for its companies trading in this region. It will remain the guarantor of the eco’s stable parity against the euro.
The statespeople of the countries using the CFA franc also wanted this guarantee.
It is said that potential turmoil forces them to do so. Even if they are comfortable now, those who face economic difficulties in the future may need support.
This situation is interpreted as the continuation of the existence of the CFA.
Criticisms that the full liberty of the local currency is undermined by this guarantee and that the cordon linking France and the BCEOA has not been cut should be taken seriously.
Is circulation possible?
Due to the spread of COVID-19, the pace of development is experiencing a serious decline. Unfortunately, the conditions for the transition to the eco have been negatively affected by inflation, excessive borrowing and public debt.
If there is no common currency in circulation among the 15 countries in the West African Monetary Zone (WAMZ), it may not be able to establish strong political relations.
For today, the most troublesome point is to print banknotes as soon as possible. This issue has not yet been clarified. The CFA franc is still printed by the Bank of France.
*Turkey’s ambassador to Senegal
Culled from Daily Sabah
The eco at an exchange rate of 650 to one EURO is a joke. So many economies combined and still could not leverage to a meaningful rate, what type of logic is that?