November 11, 2021

Will France Derail West Africa’s Common Currency?

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In 2019, the first currency union in Africa seemed poised to become a reality – until an unexpected intervention by Emmanuel Macron disrupted the process. Macron has said he wants to examine France’s legacy in Africa and establish a new relationship with its former colonies, but his actions speak louder than his words.

YAOUNDÉ – An unprecedented Africa-France summit took place at the beginning of October in Montpellier, France. For the first time since these summits began in 1973, no African heads of state were invited. Instead, French President Emmanuel Macron held discussions with students, entrepreneurs, artists, and athletes. The purpose of the gathering was to find ways to “rebuild” the relationship between France and Africa, especially in light of growing anti-French sentiment in many Francophone countries across the continent.

But there are reasons to question the sincerity of France’s initiative to reset relations with its former African colonies, particularly given Macron’s intervention in the creation of a new shared currency for West Africa.

In June 2019, after nearly 30 years of discussion and multiple missed deadlines, the 15 members of the Economic Community of West African States (ECOWAS) announced that their planned new currency, dubbed the eco, would be introduced in 2020. But at a joint news conference that December with President Alassane Ouattara of Ivory Coast, Macron declared that in 2020, the eight French-speaking West African countries (Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal, and Togo) would retire their shared currency, the West African CFA franc, and replace it with a new currency – also called the eco. This statement surprised the other seven ECOWAS countries, which are primarily Anglophone, since it directly contradicted the roadmap for a new currency set out only six months before.

On the surface, there is some logic to this course of events. The eight Francophone countries already share a currency, so theoretically they would be more prepared to be part of a currency union. After Macron’s statement, there was some discussion that the remaining seven countries should first form a monetary union on their own. Once this union proved functional, it would be much easier for these countries to join the eco. But in practice, the creation of the separate West African eco serves to tie these countries more closely to France than to their African neighbors.

In addition to changing the name of the West African currency, the statement by Macron and Ouattara stipulated that countries using the new eco would no longer be required to keep half their reserves in France, and France would not be involved in managing the new currency. But, whereas the plan for the ECOWAS eco called for a flexible exchange rate, the new eco, like the CFA franc, would be pegged to the euro, and France would remain the guarantor of its convertibility.

Macron and Ouattara’s announcement created an uproar in the region. Soon after the announcement, the president of Ghana, Nana Akufo-Addo, affirmed his country’s readiness to join a new currency union – but not on the terms laid out by Macron and Ouattara. In January 2020, six mainly Anglophone West African countries – Gambia, Ghana, Guinea, Liberia, Nigeria, and Sierra Leone – issued a joint statement denouncing Macron and Ouattara’s program. In June 2020, Nigerian President Muhammadu Bahari tweeted that the French-speaking countries’ decision to create a new common currency unilaterally implied a lack of trust in the other ECOWAS partners and indicated that his country, which accounts for 70% of the ECOWAS gross domestic product, would not join.

As the COVID-19 pandemic continues to rage in West Africa, many economists argue that the region needs to focus on economic recovery rather than projects like a new currency. Nevertheless, at the end of May 2021, a West African currency symposium, Les États Généraux de l’Eco, was held in Lomé, Togo, to discuss the end of the CFA franc and the introduction of the eco. The declaration issued at the end of the symposium affirmed the plan first introduced by Macron and Ouattara in December 2019 and the intention of the West African Francophone states to move forward.

Then, in June 2021, the ECOWAS countries held a summit in Accra, Ghana, where they announced a new timetable for their eco. It is now scheduled to be implemented in 2027. Jean-Claude Kassi Brou, president of the ECOWAS Commission, blamed the pandemic for the delay.

How the ECOWAS eco will interact with the eco used in Francophone West Africa is an open question. And the answer may depend on how sincere France is about rebalancing its relationship with its former colonies.

Simplice A. Asongu is Lead Economist and Director of the African Governance and Development Institute.

The text has been adapted from Project Syndicate website

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