The eight members of the West African Economic and Monetary Union (UEMOA)—Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal, and Togo—announced in December that they would be replacing their CFA franc currency with a new one called the eco. The move was hailed as the end of an era and a sign of UEMOA becoming more financially independent from their former colonizer France (save for Guinea-Bissau, which was colonized by Portugal).
The six non-CFA members of the Economic Community of West African States (ECOWAS), of which UEMOA is a part, have denounced the move. Under the aegis of the West African Monetary Zone, the countries of The Gambia, Ghana, Nigeria, Guinea, Liberia, and Sierra Leone accused UEMOA of pre-empting the name “eco,” which was to be the name for a common currency agreed upon last year by ECOWAS.
In brief, UEMOA intends to remove two provisions behind the CFA franc: the requirement to keep 50 percent of treasury reserves in the French Treasury, and the ability of France to appoint French officials to serve on the board of UEMOA’s central bank. These changes have been lauded as a successful example of decolonization, but critics point out that the eco’s exchange rate will still be pegged to the euro and guaranteed by France. French officials maintain that the pegged exchange rate has stabilized UEMOA currencies and their economies, and will continue to do so. Africans suspect that the announcement is nothing more than a public relations exercise and that France will still maintain a neocolonial monetary influence over West Africa.
The unilateral decision made by UEMOA has created rifts in West Africa. With Nigeria and Ghana as two of the largest economies in the region, it remains to be seen how their criticism will affect the success of the eco’s adoption. For France, the move towards this new currency is not just a renaming but also a potential step towards a single currency for the whole region. In either case, economists have suggested that the politics of the eco are less important than the economic issues.
Jakkie Cilliers, Head of African Futures and Innovation at the Institute for Security Studies, explains that the main impact of the CFA franc and eco is to overvalue local currencies, discouraging the production of value-added goods that are essential to creating a manufacturing base. A pegged exchange rate ensures low inflation and a stable currency, yet cripples industrialization efforts, but a floating eco would help boost the export of manufactured goods. In the end, UEMOA’s decision indicates a desire for caution.