XAF - Central African CFA Franc

Central African CFA Franc overview

Introduced in 1945, the Central African CFA Franc originated from the French colonial franc used in Africa. Despite the passage of many years and the independence of these countries, the CFA Franc has been maintained and developed into the official currency of this region.

The Central African CFA Franc (XAF) is the official currency of six countries in Central Africa, including Cameroon, the Central African Republic, Chad, the Republic of Congo, Equatorial Guinea, and Gabon.

Initially, CFA stood for "Franc of the African Financial Community" (Communauté Financière Africaine). Originally, CFA was a general term for currencies used in French African colonies, which included both West and Central African countries.

After the region gained independence, the CFA Franc was retained as a common currency, facilitating trade and providing financial stability. Notably, the Central African CFA Franc (XAF) is managed by the Bank of Central African States (Banque des États de l'Afrique Centrale - BEAC).

Characteristics of the Central African CFA Franc

Currency Denominations

The Central African CFA Franc is divided into various denominations to meet the needs of the people in the region. The coins include smaller denominations:

• 1 francs

• 2 francs

• 5 francs

• 10 francs

• 25 francs

• 50 francs

• 100 francs

• 500 francs

Meanwhile, the banknotes come in larger denominations of:

• 500 francs

• 1,000 francs

• 2,000 francs

• 5,000 francs

• 10,000 francs

No Centime Subunit

The CFA franc is subdivided into centimes (similar to cents in the dollar or xu in the Vietnamese dong), but in practice, centimes are neither issued nor circulated. Therefore, all transactions are carried out using whole franc denominations.

CFA Franc and its Relationship with the Euro

Currently, the Central African CFA Franc is pegged to the Euro at a fixed rate of 655.957 CFA francs to 1 euro. This means the value of the CFA Franc fluctuates according to the exchange rate of the Euro, providing stability and reliability. The peg to the Euro is also seen as a form of "insurance" from France to ensure the convertibility of the currency.

Exchange Rate of XAF

The exchange rate of the Central African CFA Franc (XAF) against strong currencies such as the US Dollar (USD) and the Euro (EUR) fluctuates frequently. Since the XAF is pegged to the Euro, its exchange rate is directly influenced by the fluctuations of the Euro in the international market.

In terms of exchange rates, 1 USD is generally equivalent to a specific amount of XAF, and similarly, 1 Euro has a fixed exchange rate with the XAF. The volatility in the exchange rate reflects the economic and political situation of the countries in the region, as well as the impacts of global factors.

With its peg to the Euro, the XAF has a close relationship with the fluctuations of this currency, meaning its exchange rate can change depending on the economic situation of the Eurozone and global market conditions.

The Role of the CFA Franc in Central African Countries

The Central African countries that use the CFA Franc have diverse economies and cultures, but they share a common goal of economic development and financial stability. Here is an overview of some countries using this currency:

• Cameroon: A country where the population primarily depends on subsistence agriculture, but the industrial sector is also developing. Major exports include coffee, sugar, and tobacco.

• Gabon: This country relies heavily on oil resources. Oil revenues account for almost half of Gabon's income.

• Equatorial Guinea: Known for abundant oil resources, the oil industry makes up nearly the entire income of the country.

• Republic of the Congo: Another major oil producer, though wealth distribution remains a significant issue for the people.

• Chad and the Central African Republic: These are the poorest countries using the CFA Franc. Chad has experienced numerous conflicts and political instability since independence, while the Central African Republic, despite its abundant natural resources, remains one of the world's poorest nations.

The Central African CFA Franc (XAF) plays a crucial role in the region's financial system, supporting economic stability for the CEMAC member states. Despite development challenges, the use of a common currency has facilitated intra-regional trade and helped countries maintain financial stability. Additionally, the peg to the Euro provides the necessary stability in an economically diverse and volatile region.