By Abdul Rahman Suagibu –
NEW AFRICA BUSINESS NEWS, Freetown, Sierra Leone- SENEGAL, eight West African countries to Abjure their currency reserves from the French Central Bank, this has beflood considerably in the African continent; which some school’s of taught envisage the move having implications on the French economy is fraughted with political ramifications.
In addendum, the move also comes with the decision to substitute the CFA franc – the euro-linked currency used in fourteen West and Central African countries – with new common West African currency, named ECO.
Precisely, these eight West African countries which include, Benin, Togo, Burkina Faso, Mali, Senegal, Ivory Coast, Niger and Guinea Bissau had gained independence years ago, they continued to vest their foreign exchange reserves with the French central bank. They have now decided to move their reserves to Senegal.
“We all agree on this, unanimously, to end this model,” Benin’s President Patrice Talon told French media last Thursday.
He asserted that, Paris has also agreed to release their reserves, which will now be vested with the Senegal-based Central Bank of West African States.
The CFA, which was specially created in 1945 for the French colonies of Africa, is linked to the euro and its convertibility is guaranteed by France.
From the arrangement, described by analysts as a colonial relic, these African nations, had to deposit half of their foreign currency reserves, in the French central bank.
Fred Muhumuza – Uganda based analyst said, the arrangement was linked to colonial ties with France. Muhumuza, who teaches economics at the Makerere University — one of the largest and oldest institutions of higher learning – said that depositing currency in developed countries was aimed to isolate it from political instabilities back home.
“They [developing countries] also keep their reserves in the central banks of developed countries, to get good returns, “he said. Many countries prefer to keep their reserves with the Federal Reserve System or the central banking system of the U.S., as international trade mostly uses the U.S. dollar as exchange.
President Talon agreed that, the decision may take time, but it has been adopted at the meeting of Economic Community of West African States (ECOWAS).
In July, the leaders of the region also adopted a proposal to introduce single currency — ECO, for the entire region by 2020.
In the first phase, countries with their own currencies (Gambia, Ghana, Guinea, Nigeria and Sierra Leone) will launch the ECO.
In a second phase the eight UEMOA (West African Economic and Monetary Union) member countries that have in common the CFA franc (Ivory Coast, Senegal, Burkina Faso, Mali, Togo, Niger, Benin and Guinea-Bissau) will be covered by ECO.
The introduction of the ECO was initially planned in 2003, but was repeatedly delayed due to various factors.
Idris Debby – Chadian President said, the move will clear injustice amassed on the African countries for too long. “The injustice has gone for too long. It is time to discuss issues with France to clarify many things, to allow us to have our monetary sovereignty. We do not have it today,” he intimated a media briefing on past Monday of this year.
The West African Economic and Monetary Union consist of Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal, and Togo from West Africa. The Central African Economic and Monetary Union consists of Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea, and Gabon.
“The success of the monetary union will depend on the dispositions of member states especially the Francophone countries who still rely on France for many things,” Bashiru Animashaun, an expert on the Economic Community of West African States (ECOWAS), told Anadolu Agency.
For New Africa Business News Abdul Rahman Suagibu Reports, Africa Correspondent