Some countries in West Africa currently using the CFA Franc will keep using it for at least five more years, after plans to introduce a new currency this year were delayed.
Ivory Coast’s President, Alassane Ouattara made the announcement recently, citing COVID-19 as the main cause for the delay.
The pandemic has badly affected African nations. In fact, the IMF forecasts an estimated 3.2 percent fall in the economy of Sub-Saharan Africa.
The ECO was due to go into force this year, after eight French-speaking West African countries chose to lessen their currency dependency on France. France colonized seven out of the eight countries, except Guinea Bissau.
These Francophone West African nations have been using the CFA Franc for several decades now. Many observers say it is time they abandoned the currency for a new one.
The big issue around the CFA Franc
The CFA Franc is a colonial-era currency which France created in the 1940s, for its then colonies in Africa. Some Africans consider it to be a relic of colonialism. They have urged France to loosen its grip on its former colonies on the continent.
The currency is pegged to the Euro, and has the financial backing of France’s treasury.
Owing to the use of the CFA Franc, former French-speaking colonies in Africa keep half of their foreign reserves in the Bank of France. This has raised so much concern on the continent.
The ECO has its own dose of controversy
In July 2019, 15 countries that make up the Economic Community of West African States (ECOWAS) adopted the ECO to be the single currency for the bloc.
After close to two decades of postponement, ECOWAS decided that it would begin using ECO as its single currency in 2020. Members expected the ECO to boost economic relations in the bloc, and bolster economic independence — especially among the eight Francophone countries using the CFA Franc.
However, in December 2019, the bloc was taken aback. Ivorian President Alassane Ouattara, announced that the French-speaking countries in ECOWAS would adopt a new currency. He named it “ECO” — same name given to the bloc currency.
He said that the ECO would be pegged to the Euro, and the eight countries would no longer have to keep half of their foreign reserves in France.
This move sparked criticism from the other ECOWAS members, who opposed pegging the ECO to the Euro. At least five ECOWAS members, including Nigeria and Ghana rejected the use of ECO as the single currency for the block, going by the Francophone countries’ decision. ECOWAS had always wanted an independent currency.
Uncertainty looms in five years
It is actually hard to foretell how the Francophone West African nations would be, using the ECO five years from now.
It remains unclear whether the other ECOWAS members would accept trading with them, using the currency while being pegged to Euro.
Moreover, there is even more uncertainty now. Will the independent ECO as initially planned, go into force in the other seven ECOWAS member countries?