The CFA franc, backed by the French treasury and pegged to the euro, refers to both the Central African CFA franc (XAF) and the West African CFA franc (XOF), and is accepted in 14 member countries.
CFA stands for Communatué financière d’Afrique or African Financial Community. In 2019, the CFA Franc was officially renamed the “Eco.”
Understanding the CFA Franc
The CFA franc was created by France in 1945 and pegged to the French franc.1 CFA franc can refer to either the Central African CFA franc, which is the official currency of six member nations and symbolized by the abbreviation XAF in currency markets, or the West African CFA franc, which is the official currency of eight member nations and is symbolized by the abbreviation XOF in currency markets.
When France switched from the franc to the euro, the currencies retained parity, so the currencies currently trade at 100 CFA francs to 0.152449 euro or, put another way, one euro equals 655.96 CFA francs.1
Both CFA francs are interchangeable as they hold the same monetary value against other currencies, though they are separate currencies. In theory, however, the French government or the monetary unions using the currencies could decide to change the value of one or the other. Given that it has the responsibility of backing the CFA franc, the French treasury controls 50% of the foreign exchange reserves of all 14 CFA franc using countries.
The acronym CFA, as it relates to the Franc, has had a few meanings over the years. Between 1945 and 1958, CFA stood for colonies françaises d’Afrique, referring to former African colonies of France. Between 1958 and the independence of the nations using the CFA in the early 1960s, it stood for communauté françaises d’Afrique (French Community of Africa). Finally, following the nation’s independence; and to this day it stands for Communauté financière d’Afrique (African Financial Community) in the West African Economic and Monetary Union and Coopération Financière en Afrique Centrale in the Central African Monetary Union.
XAF and XOF
The two monetary unions in the CFA franc zone currently consist of 14 sub-Saharan African nations. The West African Economic and Monetary Union, founded in 1994, contains Benin, Burkina Faso, Côte D’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo. The Central African Economic and Monetary Union consists of Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea, and Gabon. According to World Bank data, the Central African Republic has experienced around 2% annual inflation and has a gross domestic production (GDP) of just 0.4%, for the year 2020, which is the most current year of available data.2
The CFA franc is one of two regional African currencies backed by the French treasury with pegging to the euro.3 “CFA franc” can refer to either the Central African CFA franc, abbreviated XAF in currency markets, or the West African CFA franc, abbreviated XOF in currency markets. Although they are separate currencies, the two are effectively interchangeable as they hold the same monetary value against other currencies. In theory, however, the French government or the monetary unions using the currencies could decide to change the value of one or the other.