Alassane Ouattara’s Heat level: A Hot end to the CFA Franc

  • + Ouattara’s heat level is hot from negotiating the end of the CFA Franc.
  • + Eco, the new currency, will accelerate regional integration.
  • + Ouattara’s actions challenge the region’s leading power, Nigeria.
Source: Les Echos

Why is Ouattara’s heat level Hot?

 Answer: Ouattara negotiated the end of the highly critiqued CFA Franc.

On May 20th, France and the West African Economic and Monetary Union (UEMOA) officially enacted the end of the CFA Franc, removing one of the last vestiges of “Françafrique”, a term that heralds to France’s colonial past in West Africa. In June 2019, UEMOA designated Ivory Coast President Alassane Ouattara to lead negotiations with France over transitioning from the French-backed CFA Franc to the new common “Eco” currency. The decision to transition to the Eco was spurred by important efforts from UEMOA member states to adhere to the fiscal convergence criteria required to implement a common currency: public deficit under 3% of GDP, public debt under 70% of GDP and inflation under 10%. 

Ouattara, ex-governor of the Central Bank of West African States (BCEAO) and former head of the IMF’s African department, reached an agreement with Emmanuel Macron, the French President. This opens the door for gradual independence of the Eco currency from the French Treasury. The new Eco currency is set to be adopted by all ECOWAS (Economic Community of West African States) member states in the future, as Western African countries step up economic regional integration in a bid to consolidate the region’s economic union. 

The end of the CFA Franc and transition to the Eco currency, as negotiated by Ouattara, removed two key, albeit highly unpopular, conditions from the CFA Franc: the obligation to deposit 50% of the BCEAO’s reserves in the bank of France, and the French administrators who seated at BCEAO and UEMOA. However, the Eco will stay pegged to the Euro (€1= CFA 655,96), and France remains a financial guarantor for the 8 UEMOA member states. These previous two points are set to evolve after the Eco is implemented around July 2020. 

Ouattara has hailed this development as a “major historical reform”, while Macron congratulated UEMAO members that the Eco will soon become reality. The reform has been praised across the Union’s member states as an important step towards the end of Françafrique, although critics such as Senegalese economist Ndongo Samba Sylla argue that the reform was not significant enough. In response, Ouattara explained that pegging the Eco to the Euro guarantees monetary stability, restrains inflations, and limits the buildup of public debt. Ouattara’s cautious approach to implementing the Eco is embodied by France acting as guarantor of the currency, which is crucial in retaining foreign investment.

However, the end of the CFA Franc has revealed a deep divide in ECOWAS between Francophone and Anglophone countries. It appears that Ouattara’s ability to move ahead with the Eco currency amidst secret negotiations with France throughout the end of 2019 caught ECOWAS Anglophone countries by surprise, notably Nigeria. Nigeria represents 60% of ECOWAS’s GDP and has continued protectionist policies towards other West African states, backed by its oil exports and independent Naira currency. Nigeria seems unlikely to join a monetary union in the near future, citing the lack of economic convergence between ECOWAS member states. The Ivorian president’s secret diplomacy seems like a concerted effort with the support of France to disrupt the balance of power in West Africa. As such, the implementation of the Eco represents not only an economic stake for Ouattara but also a geopolitical stake in West Africa, where Ivory Coast emerges as a regional leader, backed by UEMOA and France, challenging the biggest regional power Nigeria.

Who is changing Ouattara’s temperature?

Answer: An evolution of French foreign policy in West Africa.

France is the major power broker in West Africa, a region that is marked by regular instability. Notably, French military peacekeeping forces intervened in favour of Ouattara during the 2010-2011 conflict in Ivory Coast (with support of ECOWAS and the international community), when exiting president Laurent Gbagbo refused to leave office and instigated a civil war. The end of the CFA Franc and creation of Eco strengthened France’s position in West Africa, maintaining close links with UEMOA. The French action to promote the Eco through Ouattara also isolated West African Anglophone countries (notably Nigeria), who would now have to enter the French sphere of influence to benefit from regional integration, or choose not to join the regional integration process and risk losing political standing. 

Macron’s decision to launch the Eco alongside Ouattara has re-enforced the Ivorian president’s standing, portraying him as a deal-maker and defender of African sovereignty. It seems France scored a major geopolitical victory by abandoning the CFA Franc: Francophone countries now lead the region’s monetary integration initiatives, forming an institutional base Anglophone or Lusophone countries can later join. Considering Nigeria’s reluctance to join such a monetary union, the balance of power in the region could be slowly shifting to UEMOA, headed by… major French ally Alassane Ouattara. 

What is driving Ouattara?

Answer: Public demand for more independence via France and political opportunity for reforms, shifting the balance of power in the region. 

In March 2020, Alassane Ouattara, although eligible for a third presidential mandate, announced that he would not be running for reelection. This strong gesture puts into doubt the often pessimistic views held about foreign relations, in the sense that negotiating the end of the CFA Franc was seemingly not an electoral ploy to gain more support. 

Ouattara was driven by popular sentiment against Françafrique in West Africa, particularly the perceived economic domination the French held through the CFA Franc. As a former IMF and BCEAO economist, he has a long-term vision for the Eco to become West Africa’s independent common currency, but considers that West African countries’ economies are not developed enough to have a free-floating currency at the moment. As such, he negotiated the end of the CFA Franc, but made sure France is still a guarantor of the Eco, which gives the new currency stability and trust from foreign investors.

For the time being, Ouattara believes that keeping a somewhat direct association with France in the form of pegging the Eco to the Euro, although unpopular, outweighs the risks posed by the Eco as a free-floating currency, until the convergence criteria are met. On top of the economic benefits, Ouattara sought to disrupt the geo-political situation of the region, which is dominated by Nigeria. With Macron, he consolidated the coalition of Francophone countries in West Africa through UEMOA, accelerating West African economic integration. His actions have made Ivory Coast the leader of a strengthened UEMOA, and as such, a challenger to Nigeria’s leadership of the region. 

The UEMOA-French deal reveals efficient statesmanship by Ouattara, as the CFA Franc reform keeps France content with its standing in West Africa, satisfies the demands of the general public to end Françafrique, efficiently accelerates West African regional integration, and places Ivory Coast as an important geopolitical leader of the region. As such, Ouattara has sought to place Ivory Coast in a strong geopolitical and economic position on a national and regional level, with the important backing of France, giving his potential successor a strong starting point for a new presidency. 

Why should you care?

Answer: A new start for West Africa?

On the surface, the end of the CFA Franc is an important step in the emancipation of West African Francophone nations from France. Ouattara’s objectives of economic regional integration are very tangible with the implementation of the Eco in the near future, and the success of UEMOA inspires much hope for the economic development of its member states. The success of West African nations in regional integration could spark an intensification of such initiatives around the continent. 

Ouattara’s deal with France on the Eco guarantees continuing stability for the currency and reassures foreign investors while satisfying the discontent of his population towards Françafrique. This points to excellent statesmanship, as with this deal the Ivorian president “killed two birds with one stone”. Ouattara’s decision not to run for a third term and let younger generations step up to leadership positions also shows integrity and patriotism, which will hopefully stabilize the political situation in Ivory Coast and inspire neighbouring countries. 

However, the economic aspect of the deal seems to be the only tip of the iceberg. The end of the CFA Franc continues France’s policy to “normalize” its relations with Francophone West African countries, steadily doing away with the unpopular vestiges of Françafrique. Indeed, France has recognized that long term preferential cooperation with West African nations goes through treating them as equals, and thus, has publicly positioned itself to be a sort of ‘backup’ when officially called upon (economically, militarily or politically). 

Nevertheless, the most intriguing consequence of the CFA Franc reform is France’s apparent attempt to reshape the balance of power in West Africa through Ouattara. By consolidating regional integration under Francophone UEMOA, led by major French ally Ivory Coast, France has strengthened its power base in the region, while potentially trapping Anglophone nations, notably the main regional power Nigeria.

Indeed, Anglophone and Lusophone countries are faced with two choices: participate in regional integration and enter the Francophone sphere, or remain independent but risk losing political standing towards the other West African countries (and maybe in the long-run, economic standing too). Nigeria is highly unlikely to adopt the Eco and join the Monetary Union. While Ivory Coast has now taken the leading role in West African regional integration, we can only wonder whether France has once again succeeded in steering West African politics in its favour.