The CFA franc is the common name for two distinct currencies used by fourteen countries in West and Central Africa: the West African CFA franc (ISO code XOF) and the Central African CFA franc (XAF). Both are fixed to the euro at the same rate of 655.957 CFA francs per euro and are guaranteed convertible by the French Treasury, but they are issued by different central banks and are not legal tender in each other's zones.
The currencies date from the colonial period and remain among the oldest continuous monetary arrangements in Africa. They are also politically contested, because of France's historical role in their management.
The two CFA franc zones
The West African CFA franc is issued by the BCEAO (Central Bank of West African States), headquartered in Dakar, for the eight members of the West African Economic and Monetary Union (WAEMU, or UEMOA in French): Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo. Here CFA stands for Communauté financière africaine. For the bank's full profile, see the BCEAO regulator profile.
The Central African CFA franc is issued by the BEAC (Bank of Central African States), headquartered in Yaoundé, for the six members of the Central African Economic and Monetary Community (CEMAC): Cameroon, the Central African Republic, Chad, the Republic of the Congo, Equatorial Guinea and Gabon. Here CFA stands for Coopération financière en Afrique centrale. See also the BEAC regulator profile.
History
France created the CFA franc in December 1945, when the name stood for franc des Colonies françaises d'Afrique. The arrangement survived independence in the early 1960s, with the two regional central banks taking over issuance. The currencies were pegged to the French franc, at 50 CFA francs per French franc after the 1960 introduction of the new French franc, until January 1994, when they were devalued by 50% to 100 per French franc after years of overvaluation and economic decline in the region. When France adopted the euro in 1999, the peg was carried over at the equivalent rate of 655.957 per euro.
In December 2019 France and the WAEMU states announced reforms for the West African currency: the BCEAO would no longer have to deposit half of its foreign exchange reserves with the French Treasury, French representatives would leave its governing bodies, and the currency would eventually be renamed the Eco. The euro peg and French guarantee were kept. The deposit requirement and French board seats were ended in the following years, while the renaming had not taken effect as of 2024. The Central African zone has discussed similar reforms.
How the CFA franc peg works
The arrangement rests on four principles: a fixed parity with the euro; an unlimited convertibility guarantee from the French Treasury; free transfer of funds within each zone; and the pooling of reserves at each regional central bank. It resembles a currency board in its discipline, but the central banks do lend to banks and conduct their own monetary policy within the limits of the currency peg. Because the rate is fixed and the euro is a hard currency, interest rates in the zones must broadly follow euro-area conditions, as the impossible trinity predicts.
Debate
Supporters credit the CFA franc with low inflation, stable exchange rates and easy conversion compared with many neighboring currencies, which helps trade and investment. Critics argue that the peg to a strong currency has hurt export competitiveness, that tight credit has restrained growth, that currency convertibility has made capital flight easy, and that the system preserves French influence over former colonies. The 1994 devaluation, which sharply raised the cost of imports, is often cited as evidence of the peg's rigidity.
Role in payments
For cross-border payments, the fixed rate means XOF and XAF prices can be converted to euros with certainty, and euro-denominated corridors into the zones carry no exchange rate risk between the euro and the CFA franc, apart from conversion fees. The two CFA francs are not interchangeable, however, so transfers between the zones still involve conversion. Mobile money and regional payment systems have grown rapidly in WAEMU countries.