"The CFA franc crystallizes many criticisms of the France. I see your youth blaming us for a relationship they consider postcolonial. So let's break the moorings!" said Emmanuel Macron, the French president.

In the aftermath, Bruno Le Maire, French Minister of the Economy, signed with ivorian President Alassane Ouattara, the agreement ending this currency for the eight countries of the West African Economic and Monetary Union (WAEMU).

From now on, this currency will be replaced by the "Eco", which will become the single currency of the entire Economic Community of West African States (ECOWAS), which brings together 15 countries including the continent's leading economic power, Nigeria.

Beyond the symbolism of changing the name of this currency, which refers to the vestiges of the colonial era, and which is at the center of "Françafrique", this decision, announced by the French and Ivorian presidents, is accompanied by two important technical reforms.
 

First, there is the deletion of the trading account. Clearly, it puts an end to one of the most decried mechanisms of the functioning of the CFA franc which required the centralization of at least 50% of the BCEAO's foreign exchange reserves at the level of the French Treasury.

Then, to cut off any hint of paternalism on the new currency, the representatives of the France, three in number, will no longer sit either in the bodies of the Central Bank of West African States (BCEAO), nor in the West African Monetary Union (WAMU). Clearly, the France will no longer intervene in the monetary policy decisions of the WAEMU countries, once they have adopted eco.

However, the umbilical cord is not completely broken between the France and the countries of the West African Economic and Monetary Union (WAEMU). Indeed, if the countries of the region are no longer obliged to deposit half of their reserves at the level of the French Treasury, in return for the guarantee of convertibility of the CFA franc, the France still undertakes to guarantee them this convertibility without consideration.

First, the former colonial metropolis wants to become a real economic partner and provides an answer to the fears of businessmen and ordinary citizens who did not want to lose this "convertibility" of the CFA franc.

It should be stressed that the commitment of the France is not too difficult to respect, knowing that Paris has only really played its role as guarantor on one occasion, during the crisis that led to the devaluation of the CFA franc by 50%, after forty-six years of fixed parity between the French Franc and the CFA Franc. This decision was taken on 11 January 1994, following the failure of structural adjustment policies.

Thus, whenever the countries forming the first core of the "Eco", the single currency that will replace the CFA Franc, run out of foreign currency, the Bank of France will provide its "guarantee" by lending euros to the countries of the region.

But if the WAEMU countries have been able to avoid certain crises, and the BCEAO conduct a monetary policy and management of external reserves in an efficient way, it is also thanks to the rigor imposed by Paris via the Bank of France, and that of its directors, present in the bodies of the BCEA0, administered via rules similar to those of the European Central Bank (ECB), with the priority objective of controlling inflation.

These factors have contributed to strong growth rates in the countries of the region, while posting very low inflation rates.

What will become of this discipline, at a  time when the leaders of some countries are engaged in expansionary economic policies by resorting to increasing indebtedness? It is true that with the end of the allocation of the 50% of reserves at the level of the French Treasury, the countries will have a more substantial margin of manoeuvre. However, without safeguards and improved governance in these states, reserves could run out quickly.

Nevertheless, to move from the CFA franc to the Eco, it will be necessary to overcome certain pitfalls. First, although the France has decided to offer a 'guarantee' for the convertibility of the Eco, in the same way as the CFA franc at present, which is good news for the confidence of economic agents in this new currency, the fact remains that the date of the  introduction of this single currency gionale is not yet known.

Some are talking about July 2020 for its launch. And initially, it was planned that it would be only the 8 WAEMU countries, members of ECOWAS, which would meet the convergence criteria, which could adopt this new currency. However, according to some sources quoting the Nigeria News Agency (NAN), only Togo would respect the requirements and convergence criteria to integrate the regional single currency.

Moreover, at the last ECOWAS summit, which was held on Saturday, December 21 in Abuja, Zainab Shamsuna Ahmed, the Minister of Finance of Nigeria, considered that the implementation of the Eco in 2020 was "not certain", and considered that "there was still work to be done to meet the convergence criteria".

On this point, Ivorian President Alassane Ouattara simply stressed that the accession of countries to this new currency "will depend on the will of each state".

In other words, it is very likely that we will maintain the criteria currently established at the waeMU zone with the CFA Franc and that all the countries of the region will switch directly to the Eco, knowing that, in any case, the CFA Franc will disappear.

Then there is the fact that the Eco retains a fixed parity with the euro. Thus, as is the case with the CFA franc (1 euro being equal to 655.74 CFA francs), the Eco will have an identical parity with the euro. This decision guarantees the same value of the currency for the citizens of the Eco zone who would not have to fear an immediate devaluation or depreciation of the new currency, even though they are used to the monetary rigidity of the CFA Franc.

However, it should be stressed in this regard that Paris does not in fact guarantee this rigid Eco-Euro parity. Which is, in itself, a good thing. This will allow the Eco countries to rely on their reserves to guarantee this parity. And in case they do not succeed, or no longer wish to, they could opt for "competitive devaluations" of the Eco and/or resort to the International Monetary Fund (IMF), as is the case for many countries short in foreign currencies.

But, for this last case, it will be necessary to deal with the conditions of the IMF and no longer those of Paris, in case the France decides to break this guarantee, following the integration of certain countries such as Ghana, and especially Nigeria, in the Eco zone, knowing that the first economic power of the continent is opposed to this guarantee, as symbolic as it is.

At that time, it would not be excluded that the Eco, considered strong, would be depreciated "voluntarily" to improve the region's exports. It could also push for the further development of intra-ECOWAS and intra-African trade with the advent of the African Continental Free Trade Area (AfCFTA) by making imports much more expensive.

Similarly, instead of backing the euro, the parity of the Eco could be based on a basket of currencies including the dollar, the euro, the yuan and the pound sterling, the currencies of the main economic partners of the countries of the region.

Clearly, it is on this phase of "monetary flexibility" that we expect a lot from the leaders of the BCEAO post-CFA Franc. To achieve this, the BCEAO must make its transformation between now and the launch of the Eco, by improving its governance, strengthening its independence vis-à-vis politicians and States, and reducing its dependence on Côte d'Ivoire, even though Yamoussoukro currently weighs 40% of WAEMU GDP.

This is a crucial step to protect it from the monetary financing of the budget deficits of the States today impossible, because of the rigidity imposed by certain rules put in place with the France and which explain, in large part, that the region has some of the lowest inflation rates in the world.

However, the fact that a monetary institution adopts sound monetary management rules is, in itself, very healthy, but it will be clearly insufficient, if alongside the political leaders of WAEMU, and tomorrow those of ECOWAS, lack integrity, of leadership and clear economic visions.

In short, with this decision, the leaders of the WAEMU countries remove one of the last symbols of France-Africa. This is a decision to be welcomed, if it is part of a process that should lead to the liberation of the Eco and the economies of the region vis-à-vis the French tutelage.

And this "guarantee" of convertibility of the Eco, certainly granted by the France, but decried by some economists and members of civil society in the countries of the region, who wanted an immediate and total "monetary break" with the former colonial power, has at least this advantage of maintaining a certain confidence of economic agents towards the Eco and therefore  to avoid that everyone tries to get rid of his CFA Francs at once to acquire euros.

However, a currency is only good when its users trust it. It is therefore necessary to maintain this semblance of link, the time to consolidate the achievements, and to extend the Eco, gradually, to the fifteen Ecowas States.