Eight West African countries exit France-controlled monetary zone to create Eco currency

December 23, 2019 at 02:00 pm | Money Moves, News

Nii Ntreh

Nii Ntreh | Staff Writer

December 23, 2019 at 02:00 pm | Money Moves, News

The French and Ivorian presidents announced the historic agreement in Abidjan, Ivory Coast over the weekend. Photo Credit: Pindula News

Eight African countries are severing colonial-era financial ties to France by backing out of the French-backed CFA franc monetary zone on the continent.

The move was announced at a press conference in Abidjan, Ivory Coast on Saturday. It involves all eight of the countries in West Africa who will now refer to their common currency as the Eco.

The Ivorian president, Alassane Ouattara, described the occasion as a “historic day for West Africa”. France’s president, Emmanuel Macron and the country’s finance minister, Bruno Le Maire, were also in Abidjan.

Macron was in agreement about the uniqueness of the day in history and added that “the Eco will see the light of day in 2020”.

All the countries leaving the monetary zone will also withdraw their reserves in the French Treasury. Under the agreement with then-colonized African states, 50% of their reserves were to be kept by France.

There are, however, six more African countries that are still logged into the monetary zone. They are Cameroon, Central African Republic, Chad, Republic of Congo, Equatorial Guinea as well as Gabon.

It has been reported that the departure for the eight West African countries took six months to negotiate what has been likened to Brexit.

Earlier in November, Benin’s president, Patrice Guillaume Talon, revealed that the former French colonies “unanimously agree” that the CFA franc was not a good model.

Talon, in an interview with RFI, said: “I can’t give you the date but the willingness [to leave the monetary zone] is already there. Psychologically, with regards to the vision of sovereignty and managing your own money, this is not a good model.”

But advocates for the maintenance of the system have argued that talk of backing out of the CFA franc system stems from hollow nationalism.

They have made the argument that since the CFA franc is pegged to the Euro, it provides stability to Africa’s fledgling economies. Inflation is also kept lower compared to other countries in the sub-Saharan region.

According to the International Monetary Fund (IMF), the 14 countries in the zone account for about 12% of Africa’s total gross domestic product. Their economies have expanded since France initiated financial reforms in 1994.

The critics of the CFA franc do not buy this, insisting on an African-controlled monetary system. For most of them, this is a case of ending French imperialism on the continent.

France has seats on the two separate unions under the CFA franc zone, namely, West and Central Africa. The Europeans have veto powers as well.

In other spheres of politics, France carries enormous influence in Africa even after 50 or so years since it granted to its last colony on the continent. Tens of thousands of French troops are stationed in trouble zones in Africa, but opponents have criticized what has been called the eagerness of the Europeans to resort to military solutions.

The former colonial master has also been accused of instigating coups on the continent. For many, France’s control of the currency used by African countries thus marks a totalitarian imperial effort.

The question to leave the CFA franc zone, therefore, is viewed as an option through which Africans can maintain a modicum of dignity.

Even other European countries have accused France of exploiting its former colonies.

In January, Italy’s deputy prime minister in charge of labor and the economy, Luigi di Maio, called out France’s role in the mass migration of Africans through the perilous Sahara desert and the Mediterranean waters to Europe.

Di Maio said, “France is one of those countries that by printing money for 14 states prevents development and contributes to the departure of refugees.”

Even if it can be counted a victory that African countries are leaving the CFA zone, one has to bear in mind that the adoption of the Eco by half of the Economic Community of West States (ECOWAS), will not go down well with some.

Ndongo Samba Sylla, author of The Last Colonial Currency: The Franc C.F.A. Story feels strongly about the adoption. Speaking to the New York Times, Sylla described what the eight countries have done as a “hijack” of the plans ECOWAS had.

It remains to be seen what this latest venture will yield. The Eco will still be pegged to the Euro and that in itself may not spell much of a change.

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