Governments of West African Economic and Monetary Union (UMO) countries have decided by mutual agreement with France to find an alternative to the CFA franc to create an environment that is linked to a former project of the Community of West African States (ECOWAS ) Economy is in competition.
In order to better understand this controversial project separating ECOWAS member countries, we try to explain it in five points.
Here are five things that can help you better understand the issues with this new currency.
The CFA Franc, which originally represented the French colonies in Africa when it was established in 1945, is considered a tool of post-colonial French domination over its former colonies in Africa.
After several campaigns against this colonial imprint, it is now the currency of the African financial community (for UEMOA countries, whose monetary sector was created in 1962). .
To everyone’s surprise, Alassane Outara and Emmanuel Macron announced this during a meeting in Abidjan on January 1, 2019, announcing three important changes to the emergence of the Ivorian capital, Echo, from which this news is destined to be currency. Calms African civil society, whose many activists are against this posture.
“Hearing about your youth, I wanted to start this reform. CFA Frank illuminates many criticisms of France. I see your youth accusing us of having a relationship which they consider to be post-modern. So let’s break the bunks, ”said the French President (Le Monde newspaper of December 21, 2019). .
Return of French administrators from the Central Bank of West African States (BCEAO).
France has promised to resign from the Board of Directors and Monetary Policy Committee of the BCEAO as well as the WAEMU Banking Commission.
Representatives of these various bodies have been criticized for “running the institution while ensuring respect for their attitudes and their decisions”. .
Professor Abdulaye Ndiye, professor and researcher at New York University in the United States, is associated with the BBC and wonders what mechanisms France will put in place to guarantee this new currency.
According to him, getting rid of the CFA francs associated with colonialism is beneficial and the absence of France in African currency-making institutions is a good decision.
Therefore, he said, all questions of sovereignty (printing of wealth in the region, keeping reserves in place, etc.). ). . ) Is a good thing.
“We do not yet know what France will arrange to guarantee, but if our balance of payments is lacking,” he explains.
“When it comes to this currency, we have to distinguish between monetary sovereignty and the economic question,” he continues.
Additionally Naday believes that the sector should “define a monetary policy that will allow it to recover in times of crisis”. .
However, he emphasized that “it is not monetary policy that a country or region develops”. .
“You can’t grow by just printing notes. Anti-DWI activists did not understand this. This means that after the ticket is printed you will have to deposit the tax, “he says …
Earlier, the Central Bank of West African States (BCEAO) had to deposit half of its foreign exchange reserves with Banque de France.
This will no longer happen with agreements signed as part of the new reform project.
The university professor says, “The thing that needs to be understood for the operating account is that the foreign exchange reserves will always be minimal, but it is not with France.” .
“In our multi-state sector, some political pressures may arise, causing some heads of state and government to spend too much. A minimum of foreign exchange reserves can give us a lot of confidence in the event of closure. “Putting in the Capital Region,” he explains. .
“I am more in favor of a common currency that facilitates integration compared to 12 smaller countries, each with its own currency. It is better to have a common monetary sector than many monetary policies, ”economist Abdulaye defends the rivers.
“Monetary policy cannot develop us. Monetary sovereignty, yes, but it is different from economic sovereignty. Real economic sovereignty comes through the growth of the real economy, that is, when local productivity rises and people see that there is real added value, ”he says.
“Money certainly plays a role because it is used in transactions, but this role is secondary. We can use currency, create an incentive plan to get out of a crisis, but it can be long term. Can be dangerous, in some cases to avoid the risk of inflation “, argues Professor Naday …
Paris is the official guarantor of the ECO that holds a certain parity with the euro, like the CFA franc (1 euro = 655.96 CFA franc). CFA Franc, originally paired with French Franc, was launched on December 1, January 1994.
In response to this decision, Senegal economist Demba Moussa Dembele announced on Radio France Internationale (Rfi) on December 23, 2019, that the project is “a means of torpedoing the ECOV project”. .
“To understand what this guarantee is, you have to know that it only exists, for example, in the event of a force majeure before the 1994 devaluation, when we can no longer pay for our own imports “, Pro. . Abdulaye Rivers
“Such a guarantee gives credibility to prevent our currency from being managed by the bank,” says Shree. Ndiaye.
In fact, Echo and Echo are. ECOWAS Eco has the support of 15 member countries: (Senegal, Benin, Burkina Faso, Togo, Niger, Côte d’Ivoire, Guinea-Bissau, Mali, Gambia, Guinea, Nigeria, Ghana, Sierra Leone and Cape Verde). ECOWAS was founded in 1975 and the idea of a single currency originated in 1983.
Nigeria’s President Muhammadu Buhari, whose country represented 70% of ECOWAS GDP, has previously sharply criticized UEMOA countries’ decision to “go back organic” to replace their CFA francs. “Other ECOWAS Member Countries” without consulting their country.
On the other hand, the eco-announcement announced by Macron and Auatara in December 2019 will be the single currency of the UAMOA countries and will replace the controversial CFA Franc.
If Nigeria had been in the Eco we would have had a flexible exchange rate regime, but in this case we would have to ask ourselves whether it would be in the interest of countries like Senegal or Ivory Coast. For Nigeria, which is very sensitive to fluctuations in raw material prices, ”warns Professor Abdulaye Ndiye.
“I see more of an echo with ECOWAS countries without Nigeria, that is to say where we are slowly integrating countries like Ghana, etc. . I think Nigeria is more interested in a more global Eco CODO project. “.
The official Echo release was scheduled for 1 July 2020, but apparently the project is still underway.
And yet the project, which affects 8 West African countries, was launched on the 10th. On 23 December 73 delegates to the French National Assembly adopted the right to vote (57 for, 8 for Democrats and 8 for). 8 restraint including Republican and French Socialist Party).
Ultimately, this new reform must still be submitted to the French Senate to create Echo, which is then signed by the UEMOA countries.
For Professor Abdulaye Nadey “Exiting the eco-system will strongly depend on its implementation”. .
“What we currently know will have a certain resemblance to the euro, a guarantee from France, whose mechanism we do not yet know. The teacher-researcher says that there will definitely be some follow-ups that we don’t know how to do. .
“There are projects that are natural, that is, how to look for a basket of currencies that reflect our trade with other countries. But for this we need a law different from the existing law, which was approved in 2019 and adopted by the National Assembly in December.
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CFA Frank, Echo, West African Economic and Monetary Union, Economic Community of West African States, Africa, Alsen Autara
EbeneMagazine – FR – Five things to understand about the environment: a “Franco-African” alternative to CFA Frank – BBC Africa
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