Historical Sketch

In the 1840s, France began expanding its colonial empire in Africa. In 1895, the four colonies of Senegal, Sudan, Guinea and Ivory Coast were united into the general governorate of French West Africa. More colonies and territories were included during the 20th century. During the German occupation of mainland France in World War II, the French government-in-exile established its head quarter in Brazzaville (Congo) in 1940, creating so-called "Free French Africa" out of French Equatorial Africa. At the time, French West Africa had remained loyal to the Vichy government and switched allegiance only in late 1943. After the Second World War, the French Union was created in 1946 between France and its colonies, then restyled overseas territories. The loss of the south-east Asian territories reduced the Union to mostly African territories. The 1958 constitution intended a limited self-governance of the African territories under the Umbrella of the "French Community". Guinea rejected the constitution altogether, voting for independence, while the others partly opted for joining the Community, partly for the status-quo (Gabon opted for adherence to France as an overseas department). In 1960, all the territories attained full independence. The states that formerly made up French West Africa subsequently formed an economical community.

Monetary History Overview

The Franc accounting was uniformly applied in all territories, based on a colonial law of 1826. In 1855, the Bank of Senegal began operations, and in 1874 it also issued paper money in small numbers. In 1901, the bank was reorganized into the Bank of French West Africa with issuing privilege for both the West and Equatorial African colonies. The French West African Franc was at par with the French Franc, its convertibility into metropolitan currency was limited, however. During the German occupation of mainland France, the West African colonies were loyal to the Vichy government but switched allegiance to the French government-in-exile in November 1943. The monetary system decoupled from the French one, and after a monetary agreement with Great Britain in February 1943, the French West African Franc was pegged to the British Pound.

After the Second World War, France reorganised the monetary system of its colonies. In December 1945, common currency areas were created for West Africa, Equatorial Africa and the Indian Ocean territories (Madagascar, Comoros, Reunion). Their currencies were all on par with each other and pegged to the mainland currency. The French devaluation of October 1948 was implemented only in September, so that for a short time the three CFA Franc variants re-pegged to the British Pound again. The West African CFA Franc (wherein CFA originally stood for "French Colonies in Africa", nowadays for "Financial Community of Africa") was initially issued by the Bank of French West Africa, although its privilege had already expired in early 1949. The Currency Institute for French West Africa and Togo temporarily took over in 1955, to be succeeded by the Central Bank of the West African States in 1959. A year later the constituents of French West Africa all attained independence. Guinea and Mali subsequently introduced their own national currencies, all other countries decided to keep the West African CFA Franc as common currency. The colonial monetary order was replaced by treaties on economic cooperation between France and the different countries, and the common currency area gradually developed into a monetary union. The seat of the central bank remained in Paris until 1978 when it relocated to Dakar (Senegal). The West African CFA Franc remained pegged to the French Franc, and to the Euro after 1999, with a parity guaranteed by the Bank of France. In return, 50% of the currency reserves of the member states had to be deposited at the French central bank. In January 1994, the CFA Franc got devalued by 50%, the parity has remained unchanged since then.

In late 2019, the member states of the West African Economic and Monetary Union (UEMOA) decided to reorganise the common currency to the end of severing the links to France. The guarantee by the Bank of France should cease, and the West African States take control over the currency stability against a trade balanced currency basket rather than through peg to the Euro. The name "CFA Franc" with its colonial connotation (although "CFA" no longer stands for French colonies in Africa) should be replaced by "Eco" during 2020. In 2018 already, the members of the West African Economic Community (ECOWAS) had already decided to name their planned common currency "Eco". Even if ultimately, a single common currency in all Western Africa could emerge, the identical designations have created controversy. Both the introduction of the introduction of the common ECOWAS currency and the renaming of the UEMOA currency are on hold until the mid-2020s.

In 1960, seven countries had adopted the West African CFA Franc, Benin (Dahomey), Burkina Faso (Upper Volta), Cote d'Ivoire, Mauritania, Niger, Senegal, and Togo. In 1973, Mauritania left the common currency area and introduced a national currency. On the other hand, Mali which had not joined in 1960 abolished it national currency in 1984 and re-adopted the CFA Franc. In 1997 joined Guinea-Bissau the common currency area, the first country not originating from the former French colonial empire.

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