The BCEAO (Banque Centrale des États de l'Afrique de l'Ouest, or Central Bank of West African States) serves as the one shared central bank for all eight member states in the West African Economic and Monetary Union (WAEMU, known in French as UEMOA): Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo. It issues the West African CFA franc (ISO code XOF), conducts monetary policy for the union, manages its pooled foreign exchange reserves, and regulates banking, payment systems and electronic money across the region.
The BCEAO is headquartered in Dakar, Senegal, with a national directorate in each member state. For a detailed profile, see the BCEAO regulator profile.
History
The BCEAO was established in 1959, taking over currency issue in French West Africa and Togo from an earlier colonial institution as the territories approached independence. The CFA franc was originally pegged to the French franc. Mali left the monetary union in 1962 and rejoined in 1984, and Guinea-Bissau, a former Portuguese colony, joined in 1997. The economic union was formalized in 1994 with the founding of WAEMU, the same year the CFA franc was devalued by 50% against the French franc. When France adopted the euro, the peg was transferred to the euro at 655.957 CFA francs per euro.
In December 2019 the WAEMU states and France announced reforms of their monetary cooperation. Under the arrangements that followed, the BCEAO ceased depositing half of its reserves with the French Treasury and French representatives withdrew from its governing bodies, while France's guarantee of convertibility and the fixed peg to the euro were retained. A planned renaming of the currency as the eco has not been implemented.
Monetary arrangements
The XOF operates under a fixed currency peg to the euro, supported by a guarantee from the French Treasury of unlimited convertibility. The arrangement has some features of a currency board, though the BCEAO retains more discretion over domestic credit. With a fixed exchange rate and open capital flows to the euro area, the impossible trinity limits the scope for independent monetary policy, and BCEAO rates broadly track those of the European Central Bank. The West African and Central African CFA francs are separate currencies at the same parity; the Central African version is issued by the BEAC.
Regulation of banks and payments
Banking supervision in the union is carried out by the WAEMU Banking Commission, for which the BCEAO provides the secretariat. Licensing of banks and other financial institutions follows a common regional banking law. The BCEAO oversees the union's real-time gross settlement system and automated clearing systems, and a regional interbank card and switching company provides interoperability between card networks in member states.
Electronic money and financial inclusion
The BCEAO has issued regulations allowing banks and licensed non-bank electronic money issuers to operate in the union. These rules underpin the rapid spread of mobile money in countries such as Côte d'Ivoire, Senegal and Mali. Issuers must safeguard customer funds in accounts at banks and comply with the union's anti-money laundering framework. Providers wanting to serve the whole region can, under the common rules, use a single licensing framework rather than eight separate national regimes, though local registration and operational requirements still apply.
Foreign exchange regulation
The union has a common foreign exchange regulation. Transactions with the rest of the world are generally routed through licensed intermediaries, and exporters are subject to rules on the repatriation of export proceeds. Payments within the union are free of exchange controls. Firms sending money into or out of the zone typically need supporting documentation and may need to state a payment purpose, depending on the nature of the transaction.
Debate
Supporters of the arrangement point to low inflation and currency stability compared with many neighboring countries. Critics argue that the peg to a strong currency has constrained growth and competitiveness, that the French guarantee preserves a post-colonial dependency, and that a single monetary policy may not suit economies as different as coastal Côte d'Ivoire and landlocked Niger.