*This essay was originally written for a course on Senegalese history, culture and politics
“… Without Africa, France will slide down into the rank of a third [world] power.”
-Former French President Jacques René Chirac
The West African CFA franc is the controversial currency of eight West African nations: Benin, Togo, Burkina Faso, Niger, Mali, Côte d'Ivoire, Guinea-Bissau, and Senegal. The embattled currency has been accused of facilitating French exploitation over former colonies, perpetuating economic underdevelopment in West Africa, and stifling the sovereignty of these countries. Many prominent voices in the region have called for a “divorce” from the CFA franc and a switch to the ECOWAS-proposed eco, as an alternative. But why does the franc face such heavy backlash? Will the currency be scrapped? What is the eco? I seek to answer all these questions in this paper. To arrive at my conclusions, I conducted in-person interviews with people in Senegal and enriched my background knowledge with online sources. In total, I conducted eleven interviews with people of varying backgrounds. I theorized that of those I interviewed, all would have unfavorable views towards the franc, due to allegations of it enabling exploitation and neo-colonialism, and would thus hold favorable views towards ECOWAS-backed eco alternative.
Disclaimer: This study did not have IRB approval, so it is not comprehensive and its results are not generalizable!
Methodology
While on the ground, I conducted eleven total interviews, in French (although two were in English), asking each interviewee a set of eight questions. Four of my interviewees are professors at l’Université de Cheikh Anta Diop, another four are students at the same university, one is a shop owner, one is an actor and bank worker, and another is a worker in the nonprofit sector. Of the questions I posed, the first three involved gauging what respondents associated the franc with, if they believed its negative image was justified, and ultimately if it was more worthwhile for Senegal to seek an alternative currency. The fourth, fifth and sixth questions dealt with introducing the eco, assessing its viability and finding out why it has not yet been adopted. The seventh question inquired into how different societal groups viewed the franc, and the last one asked respondents if they had another currency alternative they would like to mention. The interviews affirmed some aspects of my thesis and complicated others; I found opposition to the currency to be much lower than expected and support for the eco come from more pragmatic than ideological reasoning. As I predicted, most I interviewed held a negative view of the franc due to it being associated with the exploitation of Senegal, however many also cited violations of sovereignty and economic underdevelopment for their opposition. Additionally, a sizable minority talked about the currency with indifference. Almost all respondents gave positive signaling for the eco currency with responses ranging from enigmatic support, to a reserved “yes” and shrug on the shoulders, though many did believe Senegal was not prepared economically or politically for this transition. One interviewee even argued that the change to the eco would still perpetuate French domination. Many also touched on the idea that people needed to be better educated about the franc, the eco and what a change in currencies would look like. My goal with this paper is to use both background research and interviews to explore where the situation is right now and how it might evolve. My essay will contextualize the responses I received and, more generally, explore the impacts of and opposition to the currency. I will first explain the technical stipulations of the monetary union, then lay out why they are controversial. I will then introduce the eco is and its complications and associated risks and conclude by theorizing about the future of the currency situation.
Technical Aspects of the Currency
Important to note is that the Franc of the Financial Community of Africa (CFA franc) actually refers to two currencies: the West African CFA franc and the Central African CFA franc (used by Cameroon, the Central African Republic, Chad, the Republic of Congo, Equatorial Guinea, and Gabon). Though the Central African franc holds many legal and technical similarities with its Western counterpart, I will only be examining the West African franc. So, what exactly is the (West African) CFA franc? Technically speaking, it is a currency union between the eight adoptee countries, which Investopedia defines as “two or more economies (usually sovereign countries) share a common currency or mutually decide to peg their exchange rates to the same reference currency to keep the value of their monies similar.” In this case, the reference currency the franc is pegged to is the Eurozone’s Euro - at a 50 to 1 conversion rate -, which France adopted in 1999 to further Western European integration. As an offshoot effect of this union arrangement, all tariffs and trade restrictions between France and the other eight West African nations were scrapped. Just as in the case of Canada, Mexico, and the United States under the stipulations of the North American Free Trade Association (NAFTA), there would be no explicit fees associated with doing business in the other country. The third major stipulation of this union is that central banks must keep 50% of foreign assets with the French Treasury to guarantee convertibility at a fixed rate. In addition, an extra 20% would be maintained for “sight liabilities'.' In practice Paris holds about 50% of the money of eight West African countries, about $11.19 Billion.
In theory this helps fuel the “unlimited convertibility” of the CFA franc to the euro, to avoid currency shortages and create a more investment-friendly environment. One of the economic effects of these monetary policies is stability and predictability. In a Quartz Africa article, Director of economic and monetary research at the Université Cheikh Anta Diop’s Laboratoire de recherche économique et monétaire (LAREM), Cheikh Ahmed Bamba Diagne claims that this currency union is the most stable in the world. Where Ghanaen, Nigerian and Liberian currencies see 9%, 11% and 27% inflation respectively, Cote d’Ivoire and Senegal see only %1. Countries that have left the CFA monetary zone, like Mali, Mauritania and Madagascar have seen their currencies nose-dive in value. This economic certainty brought by the union helps retain confidence in the value of the currency. This comparative lack of volatility does seem to be understood on a micro level; both Respondent 7, Dr. Saliou Dione and Respondent 1 Cheikh Ibrahima Dafed acknowledged this aspect of the franc, in spite of their own distaste of the system.
Backlash & Controversy
However, some argue that this stability system does more to help secure French economic interests and perpetuate African dependency on Paris, than to help African nations develop, and is actually holding Senegal back. As previously stated, the value of the franc is pegged to the euro, one of the most valuable currencies in the world, which automatically results in a more valuable franc and higher prices for those who use it. This is difficult to reconcile when many have problems affording basic foodstuffs. Respondent 2, Dr. Pape Marley Ndiaye, affirmed this by saying as long as the franc is pegged to the euro, no changes to the system will make it better. Additionally, CFA Franc countries are not able to independently set their own exchange rates. Why this matters is because countries can devalue their currency to make goods cheaper and boost exports. Though this is a more drastic measure, some economists point to China as an example of a country that has used this devaluation to its advantage. They, Dr. Marley Ndiaye among them, argue that under the current monetary arrangement, Senegal is trying to help those faced by poverty with two hands tied behind its back; it could be doing much more to help, but is limited by lack of control of the currency. Along the same vein, some point to the 1994 French devaluation of the currency with alarm. At this time, Paris not only halved the value of the franc, raising the parity rate from 50 CFA francs per French franc to 100 CFA francs per French franc, but did so unilaterally. It seems that African nations did not want this change to happen, with then Senegal President Abdulaye Wade claiming there would be no devaluation, while on the campaign trail. Throughout the region, governments were blindsided by this announcement leading to “wage freezes and layoffs in the wake of the CFA devaluation, leading to widespread unrest over inaccessible goods for consumers and unmanageable price controls for suppliers.” Further, due to currency zone stipulations, each central bank only ever has access to 50% of their funds, with the rest tied up in the French Treasury. This example perfectly highlights the lack of control Senegalese have over their own monetary policy. People find this aspect of the CFA franc problematic for two main reasons; first, this limitation on union members results in them having less funds to invest in their own countries and combat poverty. Second, this seems an unreasonable measure to attain monetary stability. Many see this stipulation as an attack on the sovereignty of African nations and a continuation of the colonial status quo. Cheikh Dafed, along with Respondent 3: Dr. Paul Diedhiou, Respondent 4: Pape Bouba Barham Ndiaye and Dr. Dione all describe the system similarly as not being “advantageous” for Senegal and Respondent 5: Pap Sy Diallo joining them in adding that people seek to do away with the status quo to gain their “sovereignty”, “financial freedom”, and “economic independence.” These are not the only charges brought against the franc. Cheikh Dafed references how figures for trade within West Africa, even among those under a common currency, were dismally low because the stipulations of the franc mainly promote trade with France, as a continuation of the colonial master-subject relationship. Others such as Dr. Dione points to West Africa’s comparative underdevelopment when looking at East African countries, with their own currencies, to label the problem as structural, resulting from the franc. Thus, due to the technical stipulations of the CFA zone and how it has been managed by Paris, many feel that the system unjustly stifles the growth of African economies and maintains their economic dependency on Paris. At its best, it is as Cheikh Dafed describes, “an outdated system”. At its worst it is, as Dr. Diedhiou describes, “neocolonialism.”
What is the Eco
The eco is an alternative common currency proposed by the Economic Community of West African States (ECOWAS) since 2003. The spirit of the coin is that a common currency between the fifteen member countries would be significantly more valuable and less volatile, than any isolated one, especially with Nigeria, the world’s 27th largest economy, backing the coin. Proponents of the coin espouse it will be an African-led currency that removes Paris’s control over former colonies, granting West African CFA franc members their sovereignty. The coin would also work to increase regional unity and give a chance for West African states to escape the hold of questionable stipulations from the CFA system (pooling of money, parity with euro, etc.) and take greater measures to increase economic growth. However, there are reasons as to why this currency has not yet been adopted. First, there is concern that CFA countries’ central banks have never had the experience or political independence of fulfilling what would be their basic duties under the eco. Second, the economies of the fifteen member states are presently too different to support a common currency. For one, economies in the region range from oil-dependent to agricultural-dependent and inflation rates in franc zone countries are drastically lower than other ECOWAS countries. Thus, the convergence criteria set out by ECOWAS: a single-digit inflation rate at the end of each year, fiscal deficit of no more than 4% of the GDP, central bank deficit-financing of no more than 10% of the previous year’s tax revenues, and gross external reserves that can give import cover for a minimum of three months, have not been met. Economists such as the University of Cape Coast Ghana’s John Garchi Gatsi also contend that factors such as endemic corruption, lack of will by political elites and citizens’ lack of information about the currency need to be first addressed before the eco can seriously be discussed. Understanding the lack of will by political elites to seriously push for change, Dr. Dione, Mr. Barham, Dr. Diedhiou and Cheikh Dafed all expressed similar dissatisfaction with political candidates who campaign on scrapping the franc to ultimately do nothing and the lack of action taken by elites who benefit from the arrangement. Mr. Sy Diallo, Mr. Barham, Dr. Diedhiou and Cheikh Dafed also expressed concerns Senegal’s population was too uneducated about the franc and eco or otherwise unprepared for a change in currency. Of particular interest is the opinion of the Youth in Senegal. Coming from all over the country, those twenty-five and younger make up 60%, and though not a monolith, have united in certain movements to push for political and societal change. If united, the youth would be crucial to the future of eco adoption. Yet I received checkered answers about the youth opinion on the franc. Cheikh Dafed believed that the youth broadly wanted change, while Mr. Barham claimed that the youth had no clue what the eco was. Dr. Diedhiou said that few youth were informed about the franc, while Mr. Sy Diallo said that the young people were too uneducated on how a change would impact the economy.
France’s Response
Since France has a major economic stake in the CFA zone countries, it was also one of the first entities mentioned when respondents discussed the feasibility of scrapping the franc. Dr. Dione even posited that it is not Senegal who depends on France, but France who depends on Senegal, since it has come to depend on the exploitation of the country’s natural resources. No matter the reason, maintaining its financial relationship with its former colonies is of key interest to Paris. Due to this, Dr. Dione, Mr. Barham, Dr. Diedhiou and Cheikh Dafed expressed that France would either never allow Senegal to adopt another currency, outside of its control, or would punish the country for doing so. This would explain French President Emmanuel Macron and Ivorian President Alassane Ouattara’s 2020 announcement of plans to scrap the franc and replace it with another currency, also called the eco. Under this arrangement, it is proposed that the 50% foreign asset requirement would be scrapped, along with French seats at the West African Central Bank. The announcement came as a surprise to other ECOWAS members and seemed to throw plans for their eco into limbo. Commentators have said this was a clear grab by Paris to undermine the original plan for the shared currency, and Dr. Diedhiou believes the announcement has compromised the eco altogether. With plans for the original eco being in flux and France pushing for its alternative plan, he believes Paris will still find a way to retain power and maintain Senegal’s dependency.
Conclusions and Limitations
I originally predicted that due to the negative perception of the CFA Franc, interviewees would be in favor of the ECOWAS eco adoption. How did my results stack up? Most respondents did hold negative views of the franc and expressed the need for change though three gave indifferent responses (Pape Abdou Cisse, Pape Diack and Omar Gueye). However, when asking further about the eco, responses tended to become muddier, with many in favor of adoption, but also asserting that Senegal was not yet ready for another currency. Some also remained indifferent. Though Cheikh Dafed argued that Senegal was not yet ready to adopt the eco, he would rather “try and fail” than stay complacent. Dr. Marley Ndiaye wholeheartedly supported the adoption, while Dr. Diedhiou was indifferent. He argued that due to Paris’s recent proposal for an alternative eco, French domination would continue with or without adoption. Mr. Barham Ndiaye acknowledged that others were afraid of change, but that he was not. Mr. Sy Diallo concurred with Cheikh Dafed in saying that Senegal was not yet ready and said that it must first prepare its economy before taking the plunge. Mr. Gueye was indifferent towards the currency and asserted that there were much more immediate exploitative concerns to deal with, such as foreign companies drilling for oil in fishing areas. Dr. Dione signaled positively for adoption, though acknowledged that all West African countries must do so simultaneously or there would be failure. Pape Cisse and Pape Diack signaled positively for eco adoption but also said that they did not, personally, have any gripes against the franc. Roseline Nakouye and Maurice Diouf also expressed support for the eco. Unfortunately, due to the limited sample size of my project (eleven interviews) and lack of accounting for confounding variables (location, socioeconomic status, gender, occupation, etc.) my results cannot be generalized; however, they can be the springboard for future research regarding the topic. In the future, I would like to return to Senegal, and conduct a massive survey to better estimate the proportions of people in Senegal in favor, against and indifferent towards the franc and Eco, and why.
The Future of the CFA Franc
Now that there is a clearer picture painted of where things are now, where does this issue go in the future? The launch of the Eco has been postponed at least four times: In 2005, 2014, 2014, and 2020. The next launch date has been set in 2027, but it will remain to be seen if the project is delayed yet again. Though France has been spurred into action to reform some unpopular parts of the franc, through its new eco proposal, it will no doubt seek to retain its advantageous position in relation to its former colonies. The CFA franc may be on its way out the door for good, but the status quo may stay the same. If there is to be true and lasting change to this situation, two things must happen. First the political elites who benefit from this system must push for genuine change, and second there must be a concerted effort to educate people on the coercive aspects of the CFA franc, the difference between the two proposed ecos and what a change to the ECOWAS-backed eco would entail. With these efforts, Senegal may be able to forge its own path forward, asserting its sovereignty, but it will have to navigate through many obstacles.
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