Colonial rule in Africa may be over but still there is a colonial hangover refusing to leave the cultural and economic ethos of the people. A classic example is the West African CFA franc, a currency earlier tied to Franc and now with euro with the extinct of the former, harking back the colonial era connect. Eight countries use the euro-pegged West African CFA franc. They are Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo. These currencies enjoy unlimited convertibility with euro. They have to mandatorily deposit 50% of the reserves with the Bank of France, which guarantees the free conversion into currency of their choice.
Now chinks have been appearing in the colonial arrangement, which worked for several decades, no matter what was the end result. A question being echoed across the western Africa is why one should invest in Bank of France and why not in African Central Bank. The ideation did not come in a vacuum. The uneasiness was brewing for quite some time. If one goes beyond the veil of reason adduced, there are factors that go beyond sheer economics. To be fair to the old arrangement, the economic architecture worked satisfactorily. The foreign exchange kept in the Bank of France acted as a buffer and saved the western African economies from frittering away the precious reserves. That way, these countries are in a better position than countries like Zimbabwe, which are perennially under financial distress for a long stretch of time.
What now coming to play is political undertones. The generation born after the colonial period is asserting why should they maintain an organic link with a nation/s, which ruled the roost and stashed away precious wealth out of the region. What does sentiment have in the 21st century, where everything is ruled by crass commercial sense and appeal? More than that, there are isolated voices resonate from the western African countries as to what is the need to maintain reserves with Bank of France when CFA countries are reeling under pressure to meet their import obligations due to inadequate foreign exchange?
The efforts towards pulling out of the CFA agreement are at an advanced stage. The 15- member Economic Community of West African States (Ecowas) agreed to adopt a single currency- the “eco”, as early as next year. The grouping under Ecowas includes the eight members of the West African Monetary Union (Wamu), and the other seven – Cape Verde, The Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone – which have their own currencies.
Many thought the dream of a monetary union is far- fetched since the countries in the grouping may not garner the political will to usher in major economic transformation due the fragile nature of their economies. However, it got the much needed boost very recently when Benin leader Patrice Talon said the Wamu planned to pull their reserves from the Bank of France. He also set a date and that is 24th November, when his country would withdraw the reserves from Bank of France, lock, stock and barrel telling that the decision is more driven by sentiments and not technical alluding to the pressure being exerted by people who want to consign their colonial legacy.
But Benin’s declaration has its own critics also, who call the decision hasty and ill-conceived. They feel that withdrawing reserves with the Bank of France would go against the very purpose of franc zone, which was conceived as a cushion against the pitfalls that the economies of the grouping would slip into mainly from the foreign exchange perspective and the impact on the import of essential goods, these economies have to depend on. Also, if the French guarantee is scrapped, this would open the door to questioning the franc’s fixed exchange rate, of 655.96 CFA to the euro. That would mean the measure of comfort guaranteed to the western African countries would not be available in the future.
Yet, the overwhelming opinion is to come out of the CFA arrangement and peg the eco to a basket of currencies including euro, dollar, Yuan, Pound and Yen. Many exporters are for this change since they can keep their reserves in other forms of currency apart from Euro, particularly when dollar is used as the most transacted currency. The French is seemingly circumspect since the feeling among the bankers there is that they do not have much to gain from continuing with the arrangement since the balance being kept by these eight countries does not add to a significant amount. They feel that the ball is in the court of western African countries and if majority of them decide against the CFA agreement, it should be disbanded.
