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ECOWAS Countries To Rename Common Currency, Calm France Worries Over CFA Withdrawal|The Republican News

New ECOWAS currency, Eco

Eight West African countries Saturday agreed to change the name of their common currency to Eco and severed the CFA franc’s links to former colonial ruler France.

The CFA franc was initially pegged to the French franc and has been linked to the euro for about two decades. Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo currently use the currency. All the countries are former French colonies with the exception of Guinea-Bissau.

The announcement was made Saturday during a visit by French President Emmanuel Macron to Ivory Coast, the world’s top cocoa producer and France’s former largest colony in West Africa. Ivory Coast President Alassane Ouattara, speaking in the country’s economic capital Abidjan, announced “three major changes”. These included “a change of name” of the currency, he said, adding that the others would be “stopping holding 50 percent of the reserves in the French Treasury” and the “withdrawal of French governance” in any aspect related to the currency.

President Macron hailed it as a “historic reform”, adding: “The eco will see the light of day in 2020.” The deal took six months in the making, a French source said. The CFA francs value was moored to the euro after its introduction two decades ago, at a fixed rate of 655.96 CFA francs to one euro.

The Bank of France holds half of the currency’s total reserves, but France does not make money on its deposits stewardship, annually paying a ceiling interest rate of 0.75 percent to member states. The arrangement guarantees unlimited convertibility of CFA francs into euros and facilitates inter-zone transfers. CFA notes and coins are printed and minted at a Bank of France facility in the southern town of Chamalieres.

The CFA franc, created in 1945, was seen by many as a sign of French interference in its former African colonies even after the countries became independent. The Economic Community of West African States regional bloc, known as ECOWAS, earlier Saturday urged members to push on with efforts to establish a common currency, optimistically slated to launch next year.

The bloc insists it is aiming to have the Eco in place in 2020, but almost none of the 15 countries in the group currently meet criteria to join. ECOWAS “urges member states to continue efforts to meet the convergence criteria”, commission chief Jean-Claude Kassi Brou said after a summit of regional leaders in the Nigerian capital Abuja.

The key demands for entry are to have a deficit of less than 3 percent of gross domestic product, inflation of 10 percent or under and debts worth less than 70 percent of GDP. Economists say they understand the thinking behind the currency plan but believe it is unrealistic and could even be dangerous for the region’s economies which are dominated by one single country, Nigeria, which accounts for two-thirds of the region’s economic output. Nigeria’s Finance Minister Zainab Ahmed told AFP “there’s still more work that we need to do individually to meet the convergence criteria”.

ECOWAS was set up in 1975 and comprises Benin, Burkina Faso, Cape Verde, Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo — representing a total population of around 385 million. Eight of them currently use the CFA franc, moored to the single European currency and gathered in an organisation called the West African Monetary Union, or WAMU. But the seven other ECOWAS countries have their own currencies, none of them freely convertible. CPS

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8 Former French Colonies In Africa To Withdraw Cash Reserves Kept At France’s Central Bank

The decision of West African nations to withdraw forex reserves from France, fraught with implications, warn experts

Felix Tih and James Tasamba

ANKARA / KIGALI

The proposal of eight West African nations to withdraw their currency reserves from the French central bank, has evoked a spate of reactions. 

While it has been largely hailed in the African continent, experts fear, the move having implications on the French economy, is fraught with political ramifications.

The move also comes with the decision to replace the CFA franc – the euro-linked currency used in 14 West and Central African countries – with new common West African currency, named eco.

Even though these eight West African countries which include, Benin, Togo, Burkina Faso, Mali, Senegal, Ivory Coast, Niger and Guinea Bissau had gained independence years ago, they continued to vest their foreign exchange reserves with the French central bank. They have now decided to move their reserves to Senegal.

“We all agree on this, unanimously, to end this model,” Benin’s President Patrice Talon told French media last Thursday.

He claimed that Paris has also agreed to release their reserves, which will now be vested with the Senegal-based Central Bank of West African States.

The CFA, which was specially created in 1945 for the French colonies of Africa, is linked to the euro and its convertibility is guaranteed by France.

According to the arrangement, described by analysts as a colonial relic, these African countries, had to deposit half of their foreign currency reserves, in the French central bank.

A Uganda based analyst Fred Muhumuza said the arrangement was linked to colonial ties with France. Muhumuza, who teaches economics at the Makerere University — one of largest and oldest institution of higher learning – said that depositing currency in developed countries was aimed to insulate it from political instabilities back home.

“They [developing countries] also keep their reserves in the central banks of developed countries, to get good returns, “he said. Many countries prefer to keep their reserves with the Federal Reserve System or the central banking system of the U.S., as international trade mostly uses the U.S. dollar as exchange.

“It is also true, that these reserves act as a good resource for developed countries and not for their real owners,” Muhumuza told Anadolu Agency.

Move to hit French economy

He, however, said the move was fraught with political implications, as it will hit French economy. “Loss of a pool of resources and control of the economies of these countries will have cascading effects on France, which may not take the move lightly. It will be difficult to transfer reserves. There were similar proposals before. They never materialized,” said the experts, adding that he was keeping his fingers crossed.

President Talon agreed that the decision may take time, but it has been adopted at the meeting of Economic Community of West African States (ECOWAS).

In July, the leaders of the region also adopted a proposal to introduce single currency — eco, for the entire region by 2020.

In the first phase, countries with their own currencies (Gambia, Ghana, Guinea, Nigeria and Sierra Leone) will launch the eco.

In a second phase the eight UEMOA (West African Economic and Monetary Union) member countries that have in common the CFA franc (Ivory Coast, Senegal, Burkina Faso, Mali, Togo, Niger, Benin and Guinea-Bissau) will be covered by eco.

The introduction of the eco was initially planned in 2003, but was repeatedly delayed due to various factors.

Chadian President Idris Debby said the move will clear injustice heaped on the African countries for too long. “The injustice has gone for too long. It is time to discuss issues with France to clarify many things, to allow us to have our monetary sovereignty. We do not have it today,” he told a media briefing on Monday.

The West African Economic and Monetary Union consist of Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal, and Togo from West Africa. The Central African Economic and Monetary Union consists of Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea, and Gabon.

“The success of the monetary union will depend on the dispositions of member states especially the Francophone countries who still rely on France for many things,” Bashiru Animashaun, an expert on the Economic Community of West African States (ECOWAS), told Anadolu Agency.

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