French Afrique (Part II): Alternatives to CFA Franc
An exploration of the perceived impracticalities of leaving the CFA Franc
The last time we spoke about French Afrique, we spoke about the CFA Franc (Communauté financière d'Afrique: “French African Community”). There is a CFA Franc for Central Africa and West Africa. Today, we will continue our discussion of French Afrique by discussing alternatives to the CFA Franc for French Africa and France’s economic pivot away from French Africa.
Françafrique: The CFA Franc (Part 1)
The CFA franc is a currency that France gives to it former colonies. CFA originally meant “Colonies Francaises d’Afrique” (French Colonies in Africa), but now it means “Coopération financière en Afrique” (Financial Cooperation in Africa). Pascal Airault & Jean-Pierre Bat, in
Alternatives to the CFA franc.
French African activists have spoken incessantly about leaving the CFA Franc. However, the question remains: what are the alternatives? Why have the French African leaders been reluctant to relinquish the CFA Franc?
Alternative Solution #1: Each country could have its own individual currency. But that doesn’t save them from capital flight issues, balance of payments crises, and several currency devaluations as seen in Ghana and Nigeria. The CFA Franc has only had one devaluation since these French countries have been independent. As a result, some nations gladly defend the CFA Franc. Ivory Coast’s President, Alassane Ouattara, has defended the CFA Franc claiming that the “CFA Franc assures debt sustainability.” Ultimately, despite the fact that France has interfered in Africa many times, the CFA Franc is a “voluntary association.” Guinea, Madagascar, and Mauritania have left (although Guinea was punished by France for being the first), and Portuguese colony, Guinea-Bissau, and Spanish colony, Equatorial Guinea willingly joined the CFA Franc. In short, even though most African countries have their own sovereign monetary policy, French CFA Africa is unwilling to pursue their own monetary policy.
Alternative Solution #2: The West African or Central African region could combine their currencies. Politicians pay lip service to this idea, but that would require the West African countries to essentially depend on the demand of exports of Anglo-sphere West African titans: Nigeria and Ghana (Nigeria & Ghana make up more than half of West Africa’s exports, and the value of Nigeria & Ghana’s exports depend on oil & gas prices which are notoriously volatile). French West Africa’s sovereignty is switched from France to the whims of international petroleum markets.
Nigeria would dominate the value of the West African currency. The Red is Nigeria, and most of Nigeria’s exports are oil & gas. As you can see, the value of Nigeria’s exports in 2021 is half its worth in 2012, yet Nigeria is still the largest exporter of goods in West Africa by far. Here’s a snap shot of West African exports in 2021 (which was a poor export year for Nigeria compared to its 2012 peak when oil prices peaked). On a low oil price year, Nigeria itself is nearly half of all of West Africa’s exports.
Central Africa has the same issue. The dominate exporter in the Central African Economic Community is Angola, exporting more than the rest of Central Africa combined in many years. This is due to Angola being a massive oil & gas exporter like Nigeria.
In short, French West Africa does not want to relinquish monetary sovereignty from Frankfurt, Germany (the dominator of the euro) and hand it to Abuja, Nigeria (the would-be dominator of the West African currency). Central West Africa does not want to switch their monetary policy master from Frankfurt, Germany to Luanda, Angola (the would-be dominator of the Central African currency). In both scenarios, French Africa would be effectively surrendering sovereignty of their currency to the volatile international fossil fuel markets.
Alternative Solution #3: All of Africa could combine their currencies. Some people pay lip service to that, but there aren’t plans for total integration of currency any time soon. The plan for a universal currency in Africa was initially 2023. The plan for a universal currency has been pushed back to a time between 2028 and 2034.
In short, French African leaders have examined these alternatives and they aren’t keen on them. The CFA Franc is hated and but the alternatives are risky.
The actual solution that’s happening:
As of 2019, under Macron’s leadership, Paris agreed to completely demolish the West African CFA Franc and loosen its grip of the currency union. The West African CFA franc will be replaced with the Eco currency for the French West African nations. The Eco will still be pegged to the Euro, and France will still step in during a currency crisis during a commodity price collapse or a political crisis, but it won’t be supervised by Paris as much. For example, West African states no longer have to keep half their reserves with France’s Central bank, nor does a French official sit on the board of West Africa’s Central Bank, in Dakar, Senegal. Benin, Ivory Coast, Burkina Faso, Togo, Senegal, Mali, and Niger are “free”. However, the Central African nations are sticking with the CFA Franc. Central African Republic began to adopt bitcoin as legal tender as well.
Why is France doing this? Doesn’t this benefit France? In all honesty, while French Africa was vital to France during the Cold War (French Total Energies got oil from Gabon, French obtained gold from Central African Republic, French nuclear firm Areva got uranium from Niger and French chocolate firms got cocoa from Ivory Coast). In fact, France intervened in Africa 50+ times. As of now, France doesn’t really need French Africa or the CFA Franc anymore. In the nearly $700B of imports France bought in 2021, barely any of it came from France’s CFA Franc former colonies. France gets the vast majority of manufactured goods & medicine from other EU members and China, refined petrol from Russia & the EU, crude oil from America and Nigeria, and clothes from Bangladesh and Turkey. Frankly speaking, the European Union’s regional integration, France’s new dependence on Russian natural resources, and France’s free trade deals has made France’s French Afrique economic policy irrelevant at best and optically poor at worst. France only imported almost $30B goods from Africa (4% of France’s imports). Even more, France buys resources & goods more from Nigeria, a non French colonized country, to the tune of $3.3B in 2021, which is more than France bought from all of its CFA franc nations combined: $2B.
France sees opportunities in Africa besides its CFA franc colonies (Morocco, Algeria, and Tunisia were never on the CFA franc).
France currently does way more trade and investment in Nigeria, a former UK colony, than any other Sub Saharan African nation. France’s Axens is building an oil refinery in Nigeria which can help Nigeria produce 200K barrels a day. France’s Total Energies is investing $50B over a decade to build liquidified natural gas in Mozambique, a former Portuguese Colony. Also, if we look at French foreign direct investment, France’s biggest investments are in Nigeria, Angola, Democratic Republic of Congo, and South Africa, all four of these African nations were not colonized by France.
In conclusion, French Africa would have difficulties leaving the CFA Franc, despite the vociferous cries from the French African youth to abandon the currency. Only through commitment to stronger regionalism or Pan-Africanism could provide the French African currencies an alternative, even if the alternative solutions are problematic. France has successfully diversified away from its colonies, but now French Africa needs to diversify from France.