France’s currency war against West Africa
On Saturday 21 December, French President Emmanuel Macron and his Ivoirian counterpart, Alassane Ouattara, announced a package of “historic reforms” of the 70-year West African CFA monetary Zone. Macron explained that the reforms were part of an effort to reposition the partnership between France and Africa that is too often perceived “in terms of domination and the trappings of colonialism that did exist”, but which he admitted to be “a profound error”.
The CFA was created in 1945 as a currency for France’s colonial dependencies. It comprises 8 countries: Côte d’Ivoire, Burkina Faso, Senegal, Togo, Benin, Niger, Mali and Guinea-Bissau. They operate a customs and currency union (WAEMU) and a regional central bank, BCEAO, headquartered in Dakar.
The arrangement has long been criticised as a symbol of France’s continuing stranglehold over our continent. Under the currency union, each member country is obliged to keep 65 percent of its foreign reserves in an “operations account” in the French Treasury, as well as another 20 percent to cover basic financial liabilities. Paris maintains a cap on credit extended to each member country up to a maximum of 20 percent of its public revenue in the preceding year. Although the BCEAO has an overdraft facility with the French Treasury, the drawdowns on such facilities are subject to the consent of the French Treasury and based on strictly commercial terms. The French Treasury invests all the foreign reserves in its own name on the Paris Bourse. The countries are never told what profits or losses have been incurred over time.
The BCEAO has no monetary policy of its own. French officials are on the boards of the key institutions and reserve veto powers on important decisions. In 1994 the French treasury imposed a unilateral 50 percent devaluation of the CFA, amidst protests throughout Francophone West Africa. In 1999 when France joined the European single currency, the CFA was pegged to the Euro.
The CFA is the visible symbol of a complex architecture of informal Empire — “Françafrique” — that has allowed France to commit daylight robbery and pillage on our continent. When Charles de Gaulle offered the Greek gift of “independence within the French community” in 1957, Sekou Toure of Guinea was the only leader who had the balls to say “non”; declaring that his people prefer “freedom in poverty to opulence in slavery”. As a deterrent to those who might have similar ideas, the French behaved like savage barbarians; destroying vehicles, offices, schools, farms, industries, hospitals and even typewriters. They even shot cattle in ranches. What they could not destroy they threw into the lagoon. They left Guinea in ruins.
In 1962 Modibo Keita of Mali withdrew from the Franc Zone. He was later overthrown in a military coup by a former French legionnaire, Lieutenant Moussa Traore. In 1963, Sylvanus Olympio, the LSE-educated economist and first president of Togo, took the fateful decision to create a separate currency for his country. He was assassinated by a French agent and sergeant-major, Etienne Gnassingbe Eyadema.
Since the post-war era, the French have needed Africa to bolster the illusion of being a world power. Paris has always viewed the French-speaking countries as its captive “pre-carré” and exclusive economic domain. For companies such as Bouygues, Peugeot, Bolloré, Total and Elf Aquitaine, Africa is a lucrative market. French companies dominate the public utilities, with right of first refusal for public works contracts and mining concessions. The French nuclear generator, Areva, for example, sources 43 percent of its uranium from Niger. Until recently, they were paying the poverty-stricken country a mere 60 cents per kg of uranium when going price globally was US$200 per kg.
Last year, Der Spiegel, the influential German weekly, declared that Françafrique is undermining the coherence of the EU’s Africa policy. They also revealed that African countries have been paying annually an iniquitous US$500 billion in colonial taxes into the French treasury. Earlier this year a diplomatic stand-off took place between Paris and Rome, when Italian political leaders blamed France for ruining its former colonies, thereby forcing the floods of youth immigrants into Europe. There have been demonstrations within and outside our continent against the welter of economic, military and financial ties that keep our countries tied in an exploitative and highly asymmetric relationship with France.
The reforms of the West African CFA cover four essential areas: the name is to be changed to “Eco”, with external reserves no longer to be managed by the French Treasury. No French officials will be represented on the boards of the key institutions of the currency union while the external reserves will no longer be managed by the French treasury. However, France will remain the guarantor of last resort, very much as before. The Banque de France will guarantee convertibility between the Eco and the Euro.
The latest reforms are the outcome of a collusion between Emmanuel Macron and Alassane Ouattara, a foreign agent who rode to power on the blood of the Ivoirian people. They do not amount to a dismantling of the strategic manacles of Empire; but more like a hare-brained scheme to redeem France’s tainted image on the world stage. The French have recently been fingered in the rise of terrorism in the Sahel. They have allegedly been involved in massive thefts of the natural resources of Mali and Burkina Faso. Nigerian youths recently demonstrated at the French Embassy in Abuja; accusing Paris of having their leprous hands in the murderous activities of Boko Haram.
This Eco is a double-aged sword that will divide ECOWAS and alienate everyone against Nigeria, especially coming at the wake of the controversial closure of our borders. We are left with the prisoners’ dilemma option of going it alone and being isolated; or face the humiliating prospect of joining a club that has been founded by a despised foreign power.
In the year 2,000, ECOWAS leaders agreed a plan to create a single regional currency to be named the “Eco”. The plan is that the English-speaking countries of Nigeria, Ghana, Gambia, Sierra Leone and Liberia, together with Guinea, would form a currency which would later merge with the Franc Zone. It is part of a much bigger plan agreed by the African Union to create a single currency from the fusion of the various regional currencies. The West African Monetary Institute (WAMI) was created in 2001 to coordinate the efforts towards monetary integration of the English-speaking countries.
According to the Theory of Optimum Currency Areas as developed by the Canadian Nobel laureate Robert Mundell, countries must fulfil several convergence criteria before monetary integration could successfully be achieved. The crisis of the Euro in recent times further confirms why convergence is key to success. For the WAMZ countries, the convergence criteria include: a fiscal deficit of no more than 4 percent of the GDP; a central bank deficit-financing of no more than 10 percent of the previous year’s tax revenues; and external reserves with an import cover for a minimum of three months. The secondary criteria include prohibition of domestic default payments; tax revenue base that is more than 20 percent of GDP; a stable real exchange rate; and a positive real interest rate structure.
On June 29, 2019, ECOWAS leaders formally adopted the name “Eco” for their single currency to be rolled out in 2020. By renaming the CFA as Eco, the WAEMU countries have literally upstaged us. Sadly, it is unlikely that WAMZ will achieve the necessary convergence in line with the classic theory of Optimum Currency Areas. We hear that the Ghanaians are being persuaded to join the new Eco. Nigeria needs to have a clear policy and strategy. This is the time for boldness and leadership based on a clear vision of our vital national interests.