Table of Contents
- What Is the XOF (West African CFA Franc)?
- Key Takeaways
- Understanding the West African CFA Franc
- Fast Fact
- History of the West African CFA Franc (XOF)
- What Is the XOF West African CFA Franc?
- Which Countries Use the XOF West African CFA Franc?
- How Is the XOF West African CFA Franc Pegged to the Euro?
- The Bottom Line
What Is the XOF (West African CFA Franc)?
Let me explain the West African CFA franc (XOF) directly to you: it's the shared currency for eight independent states in West Africa. This currency comes in coins and banknotes, divided into 100 centimes. The Central Bank of West African States in Dakar, Senegal, handles its regulation. The countries using it are part of the West African Economic and Monetary Union, including Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal, and Togo. Collectively, these nations command a spending power over 78 billion dollars.
Key Takeaways
You should know that the West African CFA Franc (XOF) serves eight West African nations: Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal, and Togo. It was once pegged to the French franc. When France adopted the euro, the peg maintained parity at 100 CFA francs to 0.152449 euros. Remember, don't confuse it with the Central African CFA franc (XAF), used by Central African countries.
Understanding the West African CFA Franc
The CFA franc represents one of two regional African currencies backed by the French treasury and pegged to the euro. When I say 'CFA franc,' it could mean either the Central African version (XAF) or the West African one (XOF) in currency markets. These are separate but effectively interchangeable due to their identical value against other currencies. In theory, the French government or the unions could adjust one without the other.
These member countries form the CFA franc zone through their shared use of the currency. This zone consists of the West African Economic and Monetary Union and the Central African Economic and Monetary Community. The dual structure solidified the CFA franc's value by first tying it to the French franc and later to the euro. This alignment provided security and stability to the former colonies, but it required them to deposit large portions of their external reserves into French treasury accounts—initially 65 percent, later reduced to 50 percent.
Fast Fact
CFA stands for Communauté Financière d'Afrique, or African Financial Community.
History of the West African CFA Franc (XOF)
Together with the Central African CFA franc (XAF), the West African CFA franc (XOF) covers most of central and west Africa. It was introduced after World War II, replacing the French West African franc.
Several countries in the West African Economic and Monetary Union (UEMOA) were French colonies using the French West African franc, such as Ivory Coast, Dahomey, French Sudan, Mauritania, Niger, Senegal, Togo, and Upper Volta. After gaining independence, they kept using the CFA franc.
Mali, formerly French Sudan, was the exception; it created its own currency in 1961 but returned to the CFA franc in 1984 at an exchange of 1 CFA franc to 2 Malian francs. The CFA is pegged to the euro.
The CFA franc was created in 1945 after World War II. Before that, colonial currencies were pegged to the French franc. The Bretton Woods Agreement in 1945 pegged the French franc to the dollar, devaluing it, so France introduced the CFA to avoid devaluing colonial money.
The initial rate was 1 CFA franc to 1.70 French francs, changing to 1 CFA to 2 French francs in 1948 after further devaluation. This high rate led to economic stagnation in the 1980s and early 1990s. With input from France and the IMF, the unions devalued by 50 percent, leading to 5 percent GDP growth in the zone from 1995 to 2000.
When France switched to the euro, parity held, so now it's 100 CFA francs to 0.152449 euros.
What Is the XOF West African CFA Franc?
The XOF is the official currency for eight West African countries in the West African Economic and Monetary Union (WAEMU). Its code is XOF.
Which Countries Use the XOF West African CFA Franc?
It’s used by Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo. These form the WAEMU to promote economic stability and integration via a single currency.
How Is the XOF West African CFA Franc Pegged to the Euro?
The XOF pegs to the euro at a fixed rate, supporting stable trade with the Eurozone. It was originally pegged to the French franc before the euro's 1999 introduction.
The Bottom Line
The XOF is the shared currency for eight West African countries: Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo. Tied to the euro, its value remains stable against other currencies, facilitating trade among these nations and with Europe.
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