The Future of Money in West Africa

A new stablecoin pegged to the CFA Franc, Nigeria's e-Naira, and the future of the Eco.

CFA franc banknotes currently in circulation. Getty Images / Universal Images Group / Godong

Digital currencies continue to grow in popularity. Over the years the cryptocurrency economy has grown tremendously, with the market cap of the top 10 cryptocurrencies globally being over $1.5 trillion.  One of the most touted use cases for cryptocurrencies is as an alternative currency in developing economies, and as such enthusiasm for crypto remains high on the  African continent. One common pain point with the use of crypto as a mainstream payment method is its inherent instability. Bitcoin’s value today might be 50,000 USD tomorrow 20,000. Coupled with high fees it seems as if the original intended use for cryptocurrencies may never catch on in the mainstream. 

What are Stablecoins?

Enter stable coins. Stablecoins are a type of cryptocurrency linked to an asset like the U.S. dollar that doesn't change much in value. The majority of stablecoins that currently exist are pegged to government issued fiat currencies like the dollar, euro and yen.  One of the best known stable coins today is Tether ( USDT),  a blockchain-based cryptocurrency backed by an equivalent amount in fiat currencies which are held in a designated bank account. It is pegged against the U.S. dollar, maintaining  a 1-to-1 ratio with the former. 

Stablecoins allow for the use of cryptocurrencies as a practical medium of exchange , whereas currencies like Bitcoin are largely used as speculative investments. One interesting problem stablecoins can address is that of international remittances.  If you’ve ever tried to send money to someone  in a different country , you’ve probably been exasperated by the high transfer fees and long wait times.  

Introducing cXOF

While cryptocurrencies offer an alternative way to send money internationally, they can only be useful for this if the value of the currency remains stable and the fees remain low. In August 2021 DuniaPay, a full-service digital banking app created by Burkinabé entrepreneur Serge Kiema to facialtie financial services in West Africa,  announced a new stablecoin, cXOF. cXOF  is the first and only cryptocurrency to track the value of the CFA franc (XOF) — a currency used by residents in  fourteen West African countries  — and will enable them to easily save, send, and receive money anywhere in the world. cXOF can also be traded freely on decentralized exchanges like Ubeswap. cXOF typically settles in 5 seconds or less, compared to days to weeks with traditional international transfer services.


This isn’t the first attempt at a digital CFA. In 2017 The Sengalese government planned to introduce the eCFA, a digital currency to be  issued by the Central Bank of the West African Monetary Union. A digital currency issued by a government, or Central Bank Digital Currency (CBDC), works differently from a decentralized cryptocurrency like Bitcoin. Cryptocurrencies are typically decentralized, meaning they are not controlled by a singular entity, whereas the entirety of a CBDC’s supply is controlled by the government that issued it.   As of August 2021, 5 countries have officially launched digital currencies. These are the Bahamas, Saint Kitts and Nevis, Antigua and Barbuda, Saint Lucia, and Grenada. 14 other countries, including China, Sweden, and South Korea, are now in the pilot stage with their CBDCs and preparing a possible full launch. Over 81 countries globally are exploring the creation of CBDCs. 

What’s the point of  digital currencies?

There are a lot of reasons to explore virtual currencies, depending on the economic situation within a country. Here are just a few according to a report by the International Monetary Fund: CBDCs are more cost efficient than physical cash as they have lower transaction costs; they can promote financial inclusion, meaning those who are unbanked can get easier and safer access to money on their phone; they can compete with private companies that need incentives to meet transparency standards and limit illicit activity; and they can help monetary policy flow more quickly and seamlessly

In the West African CFA zone specifically digital currencies also solve one big problem: The lack of change. While there is a lot of discussion on whether or not the CFA Franc is beneficial, some arguing it is a neo colonial vestige hindering development, others arguing that it de risks investment in developing states and provides stability, one certainty is that it’s very expensive for West African states to print their currency an ocean away in France. This has led to insufficient printing of smaller denomination bills and created a severe problem of lack of change. The introduction and widespread adoption of a digital currency could eliminate this problem. 

Digital currencies in Africa

With the testing of the The ‘e-dinar’ in 2019, Tunisia became the first African country to pilot a digital currency.  Recently, Nigeria has also become interested. In 2020, 32% of the Nigerian population had used or owned some cryptocurrency. For some perspective,  just 6% of Americans reported the same.  Despite being one of the countries with the highest cryptocurrency participation in the world, cryptocurrencies are officially banned in Nigeria.  The central bank of Nigeria in 2021 began exploring the creation of a CBDC to exploit the benefits of cryptocurrencies while still maintaining government oversight and monetary control. 

But what about the Eco?

It is still unclear how the adoption of  digital currencies will affect another goal of the  Economic Community of West African States (ECOWAS) . Since its inception in 2003, ECOWAS leaders have postponed the launch of a single currency  four times. The most recent goal was to achieve a monetary and currency union by late 2020. However, the COVID 19 pandemic postponed this to 2027.

The monetary decisions made this decade will have resounding impacts on the future of West Africa. If well implemented, digital currencies and monetary convergence could facilitate payments, improve security, and boost the regional economy.