Calls for reform of an African currency bloc, which has its roots in French colonial rule, could prove disruptive for foreign investors, analysts have suggested.
The CFA franc, a key pillar of French influence in its former colonies, encompasses 14 West and Central African nations, and has faced calls for a fundamental overhaul from African leaders. French President Emmanuel Macron has also publicly signaled his willingness to engage in "meaningful" reform.
While an important source of financial stability, the CFA franc is politically sensitive owing to the power it exerts over countries which have now been independent from France for over half a century. If the guarantee was to be scrapped, the franc's fixed exchange rate of 655.96 CFA to the euro would be in question, increasing exchange risk uncertainty for investors, importers and exporters.In November, Beninese leader Patrice Talon said the eight West African Monetary Union states which use the CFA franc planned to pull their reserves from the Bank of France, telling French media that there was a "psychological problem" with the currency.
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