"Any way the wind blows" - Queen, Bohemian Rhapsody
The franc of the African Financial Community is starting to undergo some significant changes. Or at least the West African one (the other is the Central African FCFA). The West African states – both Anglophone and Francophone – are planning to adopt a common currency (the Eco). At least for the Francophone countries that are part of West African FCFA zone, this means moving from one common currency to another. A first step in this direction was taken recently, when at least symbolically, the link between the FCFA and France was cut by removing the rule that existed that meant that half the foreign currency reserves of the FCFA states had to kept on a special French treasury account (in exchange of the French currency exchange rate guarantee) and by France withdrawing from the BCEAO (the West African States’ Central Bank).
The FCFA – including its peg to the French franc and then the euro- has been much criticized, for a good overview of the key points I would recommend Pigeaud and Sylla’s, “L’arme Invisible de la Francafrique: Une Histoire du Franc CFA”. A recent article in the Jacobin, though written with a very clear angle, is also very good. Aside from the historical colonial roots of the FCFA that bother some (for a great history of France’s relationship with Africa, Bat’s “Le Syndrome Foccart” is a great read), two of the main points of criticism are the rigidity of the party (which means austerity is often the only adjustment mechanic during crises) and the structural overvaluing of the currency, in particular with regards to other developing countries.
The advantages of the FCFA has, in particular, been its stability (minus devaluations by in 1948 and 1994) and the lack of inflation in the FCFA zone (which is in stark countries with several other countries in West Africa that have had their own currencies). This, together with the longevity of the FCFA, are remarkable.
The new currency would possibly be pegged to a basket of currencies (though there is no consensus yet), and, presumably, the BCEAO could decide on the rate of coupling (and change it). Nevertheless, the challenges of currency unions when faced with crises is clearer than ever since the eurozone tribulations of the past years. Moreover, there is even less of a transfer union between the ECOWAS states, less convergence (including in national policies), and less performant governance (both at the national and regional level).
Speaking to people here in Niamey, there is still some skepticism how this will work out for the common man. For them, the macroeconomic arguments and the political / independence arguments are somewhat abstract. For them, the stability of the currency seems an important element – for the rest, they are somewhat agnostic about the technical aspects. For a political scientist, with an interest in Africa, it’s all very interesting. If the development perspectives of the region improve; so much the better. Otherwise, it will be a hard sell.
08.01.2020, Niamey, Niger.
Online encampment of A. S. Barry. Disparate and not-so-disparate thoughts on international relations, development, writing, and life.