What is the XOF (West African CFA Franc)?
Eight sovereign governments in West Africa share one currency, the West African CFA franc (XOF). The franc is divided into 100 centimes, and the XOF accepts coins and banknotes. The Central Bank of West African States, based in Dakar, Senegal, controls the currency. The West African Economic and Monetary Union’s members, which include Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal, and Togo, utilize the West African CFA France. The combined purchasing power of these nations is more than 78 billion USD.
Recognizing the CFA Franc in West Africa
The CFA franc is one of the two African regional currencies that has a peg to the euro and receives support from the French government. The term “CFA franc” may refer to either the West African CFA franc, also known as XOF in currency markets, or the Central African CFA franc, also known as XAF. Despite being distinct currencies, they may be used interchangeably since they have the same value as other currencies. However, the French government or the monetary unions that use the currencies may choose to alter the value of one or the other.
The members have established the CFA franc zone due to their shared use of the CFA franc. The Central African Economic and Monetary Community and the West African Economic and Monetary Union are separate organizations that comprise the CFA franc zone. By initially defining the CFA franc’s value in relation to the French franc—which subsequently evolved into the euro—the dual union contributed to solidifying the franc’s use and worth. The colonies achieved security and stability with the franc by harmonizing their ideals. However, in exchange, the French treasury demanded substantial deposits of its foreign reserves—first at 65 percent and subsequently at 50 percent—into their accounts.
The West African CFA Franc’s history (XOF)
The West African CFA franc (XOF), which works with the Central African CFA franc (XAF), governs most of Central and West Africa. After World War II, a new currency replaced the French West African franc.
The West African Economic and Monetary Union (UEMOA), which France founded and used the French West African franc as its currency, consists of the following countries: the Ivory Coast, Dahomey, French Sudan, Mauritania, Niger, Senegal, Togo, and Upper Volta. Those colonies kept using the CFA of France as their currency even after independence.
In 1961, Mali, then known as French Sudan, was the first sovereign colony to issue its currency. But by 1984, Mali had switched back to using the CFA franc, exchanging one CFA France for two Malian francs. The euro is pegged to the CFA.
Following the conclusion of the Second World War, the CFA franc was created in 1945. The currencies of former French colonies were fixed to the French franc. Nevertheless, the French franc lost value due to adjustments brought about by the 1945 ratification of the Bretton Woods Agreement, which set the currency to the dollar. France devised a new currency to prevent the depreciation of the money in its colonies.
In 1945, the starting exchange rate was one CFA franc for every 1.70 French francs. Following the depreciation of the French franc in 1948, the exchange rate was altered from 1 CFA franc to 2 French francs. The CFA franc zone’s member nations experienced economic stagnation in the 1980s and early 1990s due to this fictitious high exchange rate. The African monetary unions resolved to weaken their currencies by 50% after consulting with the International Monetary Fund and France. This move and other fiscal and monetary policy changes resulted in 5% GDP growth in the CFA franc zone between 1995 and 2000.
Since the currencies maintained parity when France converted from the franc to the euro, the current exchange rate is 100 CFA franc to 0.152449 euro.
Conclusion
- Eight countries in West Africa use the same currency, the West African CFA Franc (XOF): Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal, and Togo.
- When France moved to the euro, the XOF and the French franc maintained their parity, with 100 CFA francs equaling 0.152449 euros.
- It is essential to distinguish the Central African CFA franc (XAF), used by all Central African countries, from the West African CFA franc.
