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Tribune written in 2022, at the time rumors were circulating about an FCFA devaluation

For the past few weeks, rumors of a “subtle” devaluation of the FCFA have been spreading, generating both curiosity and fear on social media. According to those who support this thesis, the continued rise in market prices and the loss of purchasing power in Cameroon (and in other FCFA-using countries) would be the result of a strategy aimed at insidiously devaluing the FCFA.

At first glance, this reasoning appears plausible: in just a few months, the price of many staple goods has risen significantly. The most frequently cited example is refined cooking oil, with the liter allegedly going from around 1000 FCFA to 1800 FCFA. Consequently, with a budget of 10,000 FCFA, a household can now only afford 5 bottles of oil instead of 10. Cameroonians continue to work just as much — if not more — yet their purchasing power is declining, which seems to suggest a de facto devaluation of the currency.

However, it is crucial to recall that, from a technical standpoint, devaluation is defined as a decision by the institution responsible for managing a currency to reduce its official exchange rate relative to other currencies. In the case of the FCFA, no such official decision has been made by the member states of the BEAC. We therefore cannot speak of a “devaluation” in the strict sense. It might be more appropriate to refer to a “depreciation,” but this typically applies to currencies under a floating exchange regime, which is not the case with the FCFA.

The generalized price increase and the loss of purchasing power can instead be attributed to rampant inflation, which has also affected the euro since the onset of the Covid-19 crisis and the war in Ukraine.

A brief historical overview of FCFA devaluation

The FCFA was created in 1948 as a common currency for French African colonies, with a fixed parity to the former French franc (FF). Until January 1994, the official rate stood at 50 FCFA to 1 FF (approximately 280 FCFA to 1 US dollar). Following the 1994 devaluation and France’s adoption of the euro, the parity was set at 655.957 FCFA to 1 EUR. This first official devaluation was implemented as a response to the economic and financial crisis affecting member countries, including Cameroon, which had been hit hard by the downturn in its agricultural and oil exports.

Today, the Cameroonian economy is not at its peak, but it is not in a crisis severe enough to justify a devaluation. Despite declining oil prices in 2015, security, social, and political crises in 2016 and 2018, as well as the Covid-19 pandemic and the effects of the war in Ukraine, Cameroon still maintained a positive growth rate of 0.7%. The country has successfully diversified its economy, and inflation remains below the community threshold set by the BEAC (the same holds true for most other countries in the zone). From a strictly economic viewpoint, it is therefore difficult to speak of a “subtle” devaluation.

The geopolitical argument

Others put forward a “geopolitical” argument: that there are hidden interests prompting FCFA-using states to pay off their external debts to those supposedly orchestrating the devaluation. However, as the FCFA is pegged to the euro, repaying debt in euros is, in relative terms, equivalent to repaying it in FCFA. A so-called “subtle” devaluation would have no specific effect on servicing euro-denominated debt.

On the other hand, the depreciation of the euro (and thus the FCFA) against the dollar makes dollar-denominated debts more expensive to repay. In 2022, the dollar reached a historically high level against the FCFA, making it costlier for Cameroonians to settle debts in USD. The euro has also experienced depreciation, reducing the ability of Europeans to meet some of their financial obligations. Meanwhile, currencies such as the Chinese yuan or the Russian ruble have gained value against the euro, thus raising the cost of transactions (and debt repayment) for many African countries.

According to a report from Cameroon’s Ministry of Finance, in 2019, 76.3% of the country’s public debt was denominated in foreign currencies, including 29.4% in euros. This portfolio includes debt in US dollars and Chinese yuan, and some estimates suggest that China holds more than 50% of Cameroon’s bilateral debt.

What about the fixed parity?

Thus, the real question behind these rumors might be: does the FCFA’s fixed parity with the euro still reflect the actual situation and economic potential of the franc zone countries? Given the resilience shown by these countries during recent crises, it may be worth re-examining the usefulness of maintaining this peg or considering alternative currency management arrangements.

Dany R. Dombou, Cameroonian economist

Original version of the article available here: https://ecomatin.net/faut-il-se-preparer-a-une-devaluation-du-fcfa2

There’s something ironic about the state of Africa’s cultural and creative industries (CCIs). While African artists dominate global stages—Burna Boy headlining festivals, Nollywood captivating millions of viewers, and fashion designers lighting up runways from Paris to New York—the continent accounts for just 1% of the global CCI economy. Yes, 1%, in a market worth $2.3 trillion. Let that sink in for a moment.

Yet, a glimmer of hope emerges. The African Export-Import Bank (Afreximbank) recently announced a $2 billion annual fund to boost African CCIs over the next three years. It’s a bold move, but will it be enough to unlock the sector’s full potential?

In this article, we’ll dive into the promises and challenges of this burgeoning industry, blending current events, theory, and real-world cases.

A Promising Yet Underperforming Sector

When we talk about African CCIs, the usual suspects come to mind: music, film, fashion, and gaming. These sectors are brimming with potential, driven by a young, dynamic, and hyper-creative population. Yet, the reality is often far less glamorous. Despite their talent, many African creatives struggle to make a sustainable living.

Take Nollywood, for example, the world’s second-largest film industry by volume. It produces an impressive 2,500 films per year, but its ecosystem is plagued by distribution challenges, rampant piracy, and a dire lack of modern infrastructure. As a result, its revenues fall far short of its potential.

Investments Alone Won’t Solve Everything

Afreximbank’s announcement is undoubtedly a step in the right direction. A fund of this scale has the potential to transform the sector. But let’s ask the critical question: is money alone enough to fix decades of underinvestment?

Challenge 1: Infrastructure gaps. Across Africa, modern production and distribution facilities are scarce. Many artists must travel abroad to access professional studios, and filmmakers often struggle to bring their visions to life with limited resources.

Challenge 2: Weak legal frameworks. Creators cannot thrive without robust protection of their intellectual property. Yet, copyright infringement is rampant across the continent, and public policies to regulate and support CCIs are often insufficient.

Challenge 3: Limited access to international markets. While African cultural products resonate globally, they often lack the distribution networks and institutional support needed to scale internationally.

Theoretical Insights: A Systemic Approach

Economic development theories emphasize that financial investment, while crucial, is insufficient on its own. A systemic approach is needed—one that combines funding with structural reforms.

UNESCO’s reports on CCIs highlight the importance of integrated cultural policies, which include:

Legal protections for creators,
Infrastructure development for production and distribution,
Training programs to build capacity across the value chain.

Without these foundational elements, even significant investments risk having only a short-term impact.

A Case Study: Gaming in Africa

The gaming sector is a compelling example of both the challenges and opportunities facing African CCIs. Studios like Kiro’o Games in Cameroon and Maliyo Games in Nigeria are pushing boundaries by creating games rooted in African narratives. The market is growing rapidly, with revenues projected to exceed $1 billion by 2024.

Yet, these studios face the same recurring obstacles: insufficient funding, limited access to skilled talent, and weak infrastructure. Despite these challenges, the gaming industry offers a glimpse of what’s possible when creativity meets technology. It demonstrates that Africa can become a major player in CCIs if the right conditions are in place.

Creative Africa: Talent Held Back

So, what’s the takeaway? African CCIs are bursting with talent and opportunity. But to transform this potential into sustainable economic and social development, investments must be coupled with structural reforms.

To truly unlock the potential of CCIs, we must:

Invest in modern infrastructure for production and distribution.
Establish robust legal frameworks to protect creators.
Create pathways to access international markets.

Africa has an abundance of talent and creativity. With the right ecosystem, CCIs can become a powerful engine for growth, while showcasing the continent’s rich cultural heritage to the world.

Sources

Afreximbank: Announcement of the $2 billion fund for African CCIs, 2024
UNESCO: Reports on cultural and creative industries
Agence Ecofin: “African creative industries finally attract financing”
Forbes Africa: “The rise of African creative industries”
UNESCO and SFSIC: Studies on CCIs and development in Africa

CFA franc: Rumors of a ‘Subtle’ Devaluation—Myth or Reality?