The announced reform of the CFA franc by the French and Ivorian presidents in Abidjan deserves to be scrutinized
to understand its depth.
In view of the announcement made in Abidjan, eight West African countries, namely Benin, Burkina Faso, Côte
d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo have decided together with France to sign
an agreement that changes the terms governing the functioning of the West African franc zone and by
consequence of the CFA franc. The six Central African countries also using the CFA franc, but which form a
separate monetary zone, are not affected by this reform.

WHAT CHANGES
THE NAME
When it was created in 1945, the CFA franc meant "franc of the French colonies in Africa". After independence
the 1960s, the name had already evolved to become "franc de la Communauté financière africaine", for
the eight West African countries (Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and
Togo). But this name was still perceived as a post-colonial symbol. The FCFA will become the "Eco", which is in fact
the name chosen for the future single currency of the 15 countries of the Economic Community of African States of
West (ECOWAS).

END OF DEPOSIT OF FOREIGN EXCHANGE RESERVES IN FRANCE
Second major point of the reform, the Central Bank of West African States (BCEAO) will no longer have to
deposit half of its foreign exchange reserves with the Banque de France, an obligation that was perceived
as a humiliating dependence on France by FCFA detractors. The BCEAO "will not have to
the future no more particular obligation concerning the investment of its foreign exchange reserves”. "She will be free to
invest its assets in the assets of its choice”, according to the French presidency.

GOVERNANCE: MORE FRENCH REPRESENTATIVES
Third change: France will withdraw from the governing bodies of the Western Monetary Union
Africa (WAMU) where it was present. “France will no longer appoint any representative to the board of directors and the monetary policy committee of the BCEAO, nor to the banking commission of the WAMU”, has
explained the Élysée. It is a question of "defusing the criticisms", according to which France continued to dictate its
decisions in these instances via its representatives, according to the Élysée.

WHAT DOES NOT CHANGE
FIXED PARITY WITH THE EURO
The fixed parity with the euro of the CFA franc, future Eco, is maintained (1 euro = 655.96 CFA francs). It's about avoiding
the risks of inflation (present in other African countries), explained the Ivorian President Alassane Ouattara.
This fixed parity is however one of the characteristics of the FCFA most criticized by economists.
Africans, according to whom the peg to the euro, a strong currency, poses a problem for the economies of the region,
much less competitive, which need to give priority to economic growth and employment rather
than fighting inflation. These economists plead for the end of the fixed parity with the euro and the indexation on
a basket of the main world currencies, the dollar, the euro and the Chinese yuan, corresponding to the main
economic partners of Africa.
FRANCE'S GUARANTEE
Paris will retain its role as financial guarantor for the eight WAEMU countries. “If the BCEAO faces a
lack of availability to cover its commitments in foreign currencies, it will be able to obtain euros
necessary with France", explains the Élysée. This guarantee will take the form of a “line of credit”. "
With the maintenance of this guarantee, while waiting for the Eco, we want to avoid speculation and capital flight
“, justified Alassane Ouattara.

UNCERTAINTIES ON THE ECO
The reform of the FCFA is "a preliminary step" "in the roadmap of the single currency project of the
ECOWAS”, according to the French presidency. But when will this single currency really be launched? The countries of
ECOWAS mentioned the year 2020, but without setting a precise timetable. At the ECOWAS summit held
this Saturday in Abuja, Zainab Shamsuna Ahmed, the Minister of Finance of Nigeria - economic heavyweight
regional - considered that the implementation of the Eco in 2020 was "not certain", judging that there was "still
work to be done to meet the convergence criteria". WAEMU countries, which respect in
all these criteria (unlike other ECOWAS countries), could constitute the vanguard of
Eco.
FCFA reform should satisfy Nigeria, which demanded that a common West African currency be
disconnected from the French Treasury.