The latest developments coming out of Africa further solidifies the notion that the currency tides are turning. It was only a few decades ago that the U.S. Dollar and Oil/Dollar reigned supreme, despite its lack of actual intrinsic value. It is important to note, that in 1971 when former U.S. President Richard M. Nixon un-pegged the Dollar from Gold, a veritable “run on the bank” by U.S. currency-holding nations ensued. Switzerland and France among others began to demand redemption of their dollars for gold. A similar run has been occurring in recent times by nations around the world.
Most recently, a collection of West African states have become the latest group to seek a new currency. The West African Eco was agreed upon in 2019 by ECOWAS (Economic Community of West African States) member states. The 15 states agreed to begin feasibility studies and developing the initial groundwork of a new common currency for West African States. However, as with all multilateral plans, there were critical considerations to be made. In their initial meeting in Abuja, Nigeria, members determined that each state would need to maintain a budget deficit of less than 3 percent of GDP and a public debt ratio of less than 70 percent among other requirements. While only two of the fifteen states were able to initially meet those requirements, the ultimate goal was that states would work toward meeting the criterion, and at achievement, initiate the new currency.
However, in a stunning move, Francophone states rushed ahead, to ditch the CFA Franc. The currency rules in 14 African countries (six nations in Central Africa, and eight in West African). That was a good thing, as the CFA Franc is the only Colonial Era currency agreement still in existence in the world today. West Africa’s Francophone nations have been anxious to dump the CFA Franc, since major attention has been brought to the fact that the currency is controlled by France and requires Francophone African states to keep 50 percent of their reserves in the French Treasury. While CFA Franc countries entrust France to earn a profit on those investments, they receive 0.75 percent (less than 1 percent) of those proceeds annually. Incidentally, the six Central African nations ruled by the CFA Franc nations will not be a part of the new monetary deals.
West Africa’s Francophone nations have been anxious to dump the CFA Franc, since major attention has been brought to the fact that the currency is controlled by France and requires Francophone African states to keep 50 percent of their reserves in the French Treasury.
Recent scrutiny brought to the CFA Franc’s built-in inequity has made socioeconomic moves in Francophone West Africa appear unsophisticated and neglectful. In 2020, Francophone member countries in the West African Economic Monetary Union (WAEMU) decided to move away from the CFA Franc early by creating its own currency, ahead of ECOWAS plans of eventual regional financial integration. Ironically, WAEMU nations determined to name their new currency the Eco too!
The needlessly confusing development left many with questions and brought to the fore masked details behind both currencies. Nigeria is among the nations pumping the breaks on the ECOWAS conceived Eco currency due to the fact that it would be pegged to the Euro. Ironically, WAEMU states rushing to ditch the CFA Franc with their own “eco-dubbed” currency would also be pegged to the Euro. Ostensibly, the European Union may be seeking to replace the United Kingdom’s economic influence, post Brexit, with an economic collection of African States.
The currency envisioned by ECOWAS would also be pegged to the Euro and be convertible by the Banqe de France. Essentially, with the ECO, both Francophone and Anglophone West African states would then be connected to Frances Banking system for convertibility and pegged to the EU Euro. The major difference with WAEMU’s “intermediary ECO,” in contrast to the “ECOWAS ECO” is that it will immediately remove Frances controlling oversight and eliminate the requirement that 50 percent francophone Africa’s reserves be held in the French treasury. It is important to note that the removal of that much capital will be enormous for France, already hit by austerity measures amplified by its Yellow Vest demonstrations already moving into its second year since November 2018.
Essentially, with the ECO, both Francophone and Anglophone West African states would then be connected to Frances Banking system for convertibility and pegged to the EU Euro.
Like the contractions of a woman in labor, the push for newer, less volatile currencies impervious to external manipulations by outside actors continues. In 2000, former Iraqi leader, Saddam Hussein moved his currency away from the oil dollar toward the Euro to circumvent sanctions and manipulations. In 2009, Libyan premier Muammar Gaddafi, the then head of the African Union at the time, proposed a common African gold-backed dinar to create financial and economic security on the Continent.
An April 2011 Guardian Opinion piece by David Swanson noted that then French President Nicholas Sarcozy believed it was a threat to the current economic world system. Swanson theorized in the article that U.S. Africom headquarters would be moved to Africa, as it is based in the Stuttgart, Germany. However, in a 2016 landmark deal with Niger, one of the poorest nations in the world according to Word Bank data), the U.S. has built Niger Air Base 201 in Agadez. The landlocked country sits centrally in Africa’s Sahel, positioned in close proximity to seven African states (Nigeria, Lybia, Chad, Algeria, Benin, Burkina Faso, Chad and even Cameroon). In a cash-strapped nation, Niger also permits a U.S. Central Intelligence Agency (CIA) drone base in the city of Dirkou near Libya. Many African states have had to strike cash and “investment” deals because the current currency system renders them cash poor but resources-rich.
Many African states have had to strike cash and “investment” deals because the current currency system renders them cash poor but resources-rich.
Even beyond this, other nations are toying with new currencies and the eventual evacuation of the dollar and the petrodollar. Both China and Russia have been divesting from U.S. Debt and moving toward Gold. Recently, China (ROC) has began theinitial phases of rolling out a national digital/crypto-currency. The ROC has been diligently working on the new currency for roughly half a decade racing to stabilize its national growth. The recent trade war has masked the moves nations are making to stabilize against an increasingly volatile West.
The race is on, and quest once only envisioned by a few actors has now become the determination of many states seeking to extricate themselves from crippling debt, unworkable loan agreements, and monetary systems with built-in inequity relegating entire nations to poverty status based on arbitrary valuations. African states are now pushing for currencies that better serve its populace and growing industries.
While WAEMU states can easily change the name of the name of their currency to a less appropriated name, what remains is the fact that both “ECOs” are pegged to the Euro which will be made convertible by the Banq de France. Essentially, where France once had its hand on only 14 African currencies, it will increase to 19 states. It seems that such an arrangement could compromise the economic autonomy and diversity in the region.
African states, like so many others are ready for an economic change that makes doing business and trade in Africa profitable–not only for investors, but Africans. The question remains as to whether the ECO as it is currently conceived with connections to the Euro and the Banq de France is the right choice for states seeking a more viable and equitable currency.
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