EXPLAINER: France and the CFA in Francophone Countries

'Tosin Adeoti
7 min readOct 1, 2022

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How you frame a question determines the answer you get. That is the reason statisticians are warned against using methods like the double-barrel questions in surveys. To take an example: If you see a person and ask them, “How satisfied are you with your pay and your boss?”, you have committed that informal fallacy. This question asks about two different issues: “are you satisfied with your pay?” and “are you satisfied with your boss?” Combining both questions into one makes it obfuscates what exactly is being measured. As each question may elicit a different response if asked separately, there is an increased likelihood of confusing the respondents. In other words, while some respondents would answer “yes” to both and some “no” to both, some would like to answer both “yes” and “no” to one and the other respectively. Alas, I read somewhere that some still use barrel questions intentionally to confuse and tilt data to their bias. How you frame a question can determine what answer you would get.

Some hours ago, I posted a screenshot of a fellow who said Peter Obi is not the West’s preferred candidate. As this fellow is a known supporter of China, I could see through his inference immediately. Strangely, in the comments, I saw people talk about how the West could not be trusted and pointed to what is happening between France and French-speaking African countries. Someone commented, “African French-speaking colonies still send billions to France to this day.” Another said, “Why does France still refuse to hand over the sovereignty of the francophone countries fully to them?”

I don’t think any rational person sees statements like this and says, “What’s the big deal?” These are statements that are always bound to elicit thoughts like, “What kind of neo-colonialism is this? Of course, this cannot be right.“

Yet, that would be half the story. By making these statements, the reader has been blindsided. How you phrase a question or statement determines the answer or response you get.

The Background

These comments refer to the French policy in French-speaking African countries that requires them to deposit billions of dollars of their foreign exchange reserves in France, thereby ceding (a part of) their economic sovereignty.

But just like you may have imagined, that is not the full story.

France, like Britain, had colonies in Africa and used its own currency, the Franc, to do business. However, after World War II, the French Franc weakened, and it was officially devalued when France ratified the Bretton Woods Agreement in December 1945. That was when France created new currencies in the French colonies to spare them the strong devaluation. They wanted a way to make it easier for them to import goods from France to the colonies. For context, just imagine how happy some of you would be if the Naira suddenly became $20. You would be able to import more goods for less. However, it would be more difficult to export your goods because it means you would get less for the same value of Naira. The devaluation of a currency is great for exports but not so good for imports, while the appreciation of a currency is great for imports but not so good for exports.

On December 26, 1945, France created that currency: Les colonies françaises de l’Afrique, or the CFA (“French Colonies of Africa”). One CFA 1 was exchanged for 1.70 French francs. These countries would use the CFA, which is pegged against the Franc and guaranteed by the French treasury. This means the countries can have an unlimited conversion of the CFA to Franc. It is the equivalent of America guaranteeing that the Naira can be exchanged for the dollar at a determined value, and there is no limit to the conversion. That would immediately bring relief to the Naira. But, like in all international matters, nothing goes for nothing. France, in return, required the countries to deposit a percentage of their foreign reserves in an “operations account” in France. To explain what foreign exchange means, check out what I wrote here (1), but to simplify, it is a foreign currency that a government or central bank holds. Governments try to save up hard currencies like the dollar, the Euro, the Swiss Franc, and the pound. Foreign reserves may include treasury bills, bonds, bank deposits, banknotes, and other government securities. As a result, the African countries were required to deposit a percentage of their foreign reserves with France in a quid pro quo arrangement. It used to be 100%, but it’s now 50% of CFA franc reserves.

The Option to Leave the Zone

When African countries started gaining independence in the 1950s and 1960s, they had the choice to keep the colonial relic or leave it behind. All the affected countries chose to keep the CFA and remain in the franc zone. The exception was Guinea, which voted “no” in its 1958 referendum. Guinea left in 1960. Since it left, Guinea has frequently experienced currency shortages, and its central bank does not have sufficient policies to ensure stability. Mali left in 1960 but was back in 1984 after the decision to leave put their currency into such a tailspin that no one has been seriously tempted to follow their example since then. Curiously, countries that were not colonies of France decided to join the CFA zone — Equatorial Guinea, a former Spanish colony, and Guinea-Bissau, a former Portuguese colony.

The Attraction of the Zone

The CFA franc monetary system is designed to guarantee the franc currency in international markets while simultaneously preventing overdrafts and inflation in CFA member countries. Because of the credibility of the French Franc and now the Euro (after France joined the European Union), the currency has been stable. In fact, no CFA member has experienced a major financial crisis. That is unlike what has happened in non-CFA zones like Ghana. Nigeria, as an example, faces an enormous foreign exchange crisis that has stemmed its foreign investments. Ghana’s situation is worse. Its government officials are now running helter skelter. Yesterday, the Finance Minister included a call for ‘“God’s help’ in his budget for next year. Again, no CFA member has experienced a major financial crisis.

Also important to note is that because it is a bloc, there is freedom of transfer within the franc zone. It is equivalent to the Naira being accepted in Liberia and Ghana, English-speaking countries. You can imagine the ease of doing business that would bring.

Côte d’Ivoire President Alassane Ouattara, whom I consider a bit underrated for his economic strides of rebuilding the economy after a rending civil war and achieving seven consecutive years of growth above 7 percent, has contended that CFA zone countries are better off than Anglophone countries due to opportunities for growth aided by low inflation. He says that with the currency stability under wraps with the assistance of France, it is easier for any leader who wants to be economically successful to do so. As inflation surges around Africa, almost all Francophone countries have theirs in single digits. Indeed, in terms of trade, the CFA’s fixed exchange rate to the Euro has led to greater trade facilitation by reducing uncertainty and stabilizing domestic prices.

While critics say that the CFA countries themselves could have better used the billions sent by the countries to guarantee the exchange rate, examples of countries that are not in the CFA zone and have nothing to show for their foreign reserves show it is not so simple (I have mentioned Guinea earlier). In addition, for holding their foreign reserves, the CFA zone charges France with turning a profit from these reserves. Each CFA member country receives 0.75% interest on their deposits. Some have said that to get the interest paid, France would have reinvested the CFA reserves and that any gains above the set 0.7% interest rate would be a win for France. Of course, France would need to reinvest the reserves for it to be able to give you interest. That’s a non-argument. It should be expected even if France denies it.

Symbolism Matters?

Still, several activists say that symbolism matters more than reality. In August 2017, activist Kemi Seba publicly burned a 5,000-CFA note in Senegal, saying the currency was a relic of the colonial era. A recent video of the newly elected Italian PM is being celebrated across the continent, where she says France is exploiting its former colonies. I say that’s just populism at work by the new Italian leader looking to up her poll ratings seeing that France does not hold any country from pulling out, and in fact other non-colonies have joined the bloc.

But what is fascinating to me about the discussion is that opponents of the CFA policy discuss it as if France is adamant about a change when already, France has come out to say whoever wants to pull out is free to do so. Even better, two years ago, precisely on December 22, 2019, French president Emmanuel Macron announced that the CFA would be scrapped and France would hands off. The process is ongoing as you read. In its place, the countries have agreed to have it replaced by the ‘Eco’, which would not require that the countries keep their reserves in France. The currency would be pegged to the Euro.

The Future of the West African Currency

Interestingly, the Eco is meant to be a West African currency, including countries like Nigeria and Ghana. Adding Nigeria to the equation adds an interesting twist, given that the country is still heavily reliant on oil revenues and accounts for 73% of West Africa’s wealth. For a country whose inflation has been hovering around 15% for a couple of years now, how would that affect the CFA countries where monetary stability is a reality and has been taken for granted for decades? How would they be able to set up long-term economic policies in the face of such instability? If you would desire to have economic independence from France, why be yoked to Nigeria?

We are told to think carefully about what we ask for because, indeed, we might get it. But at least no one will accuse France of colonizing any country’s currency. Even then, that does not mean that in few years’ time, there will not be something else to blame the colonizers for. Till then…

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'Tosin Adeoti