Will the new African currency, ‘ECO’, replace the famous West Africa’s colonial-era CFA franc?

The days of the FCA franc, which has been in use in eight West African countries for close to 95 years now, could be numbered as leaders from the countries in question met in Abidjan, Ivory Coast, on Friday to deliberate on doing away with the CFA franc in favor of ‘ECO’, a new currency that the 15-member Economic Community of West Africa (ECOWAS) aims to launch somewhere next year.

The CFA franc was created by France in 1924 and originally attached to the France’s franc. It is, however, nowadays backed by EUROPE’s euro.

The CFA franc is currently being used and accepted in two currency zones – Central Africa and West Africa. The countries using the CFA franc include Burkina Faso, Benin, Ivory Coast, Mali, Guinea-Bissau, Senegal, Togo, and Niger (representing West Africa). Cameroon, the Republic of Congo, the Central Republic of Africa, Chad and Equatorial Guinea represents those in the Central Africa using the CFA franc.

In either blocks (West and Central Africa), one euro can be exchanged with approximately 656 CFA francs.

For quite some time, the CFA franc has been criticised and seen as a colonial-era tool that has continually encroached into the sovereignty of the people of West Africa. Last year, artists drawn from 10 countries in the region released a hit titled “7 minutes against the CFA franc” to push the agenda of ditching the currency.

The criticism of the CFA franc is mainly anchored on the fact that it does limit monetary sovereignty with France guaranteeing the value of the currency, and in return, requires countries that use it to keep at least 50% of their foreign exchange reserves with the French treasury.

In addition, the fact that the exchange rate between the euro and the CFA franc is fixed requires the Central Banks of the two blocks of countries using the CFA franc to follow the European Central Bank (ECB) monetary policies.

The launch of the West African currency, which has been put off several times, is seen as the only way out in terms of doing away with the old currency. However, it is yet not clear if all the 15 member states of ECOWAS will subscribe to the use of the new currency but plans are already underway to launch it in 2020. The question of whether all the member countries will have the institutional structures to aid the use of the new currency in place has also came up as part of the challenges that may face that whole mission.

There are also worries that Nigeria, the largest ECOWAS economy, may dominate the ECO to the disadvantage of other members.