What we learn from WAEMU for regional integration on the African continent

By Julia Conrad

Created in 1994, the West African Economic and Monetary Union (WAEMU) was established as a trade and currency union and encompasses the eight countries Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo1– all of which are equal members of the regional and economic union ECOWAS, the Economic Community of West African States.2 The adoption of a common currency among states is regarded as one of the highest forms of economic integration.3 Literature suggests that the establishment of a monetary union leads to increased economic activity through a rise in trade or investment flows between member countries and higher macro-economic stability.4,5,6

WAEMU as an economic union emerged from colonial arrangements. Critics also describe it as “colonial relic” that is meant to preserve the dominance of Paris and French companies in West Africa.7 It was initially aimed at reducing transaction costs, facilitating the free movement of persons, goods, services, and capital among its members.8 The IMF and some global bodies have consistently described WAEMU as successful regional bloc with a high level of economic integration.9,10 Our analysis at the Growth Lab has found little evidence for this assessment. In contrast, it seems that many critics are right in pointing towards worrying low levels of trade and investment across the bloc. They claim that low inflation can be regarded as WAEMU’s single achievement, and even then, the question remains whether anti-inflationary governance is appropriate in the development context of Africa.11

Four working principles are at the core of WAEMU: (1) a peg of its exchange rate to the French currency, (2) free income and capital transfers within the zone and with France, (3) the French treasury promises to lend euros to the Central Bank of West African States bank (BCEAO) if they exhaust own foreign exchange reserves (this "convertibility guarantee"), and in return (4) the BCEAO must deposit at least 50% of its foreign currency reserves in a special 'operations account' of the French treasury – a condition that was finally lifted in 2019.12

All Euro-XOF (CFA franc) conversions used to pass through this operations account. When it was in credit, the French treasury paid interest and when it was in debit, the guarantee was active - a scenario that only happened back between 1980-1993. A French representative also used to sit on the board of the BCEAO, but this was recently also changed.13,14 The experience of WAEMU has even animated ECOWAS leaders to envisage the implementation of the currency "Eco" across the whole of West Africa, but its launch has been repeatedly postponed, last in 2020.15 A Pan-African monetary union was also part of earlier AfFCTA discussions. Its vision was partly realized under the introduction of a Pan-African Payments and Settlement System (PAPSS) in early 2022.16

"CFA franc" is essentially the name of the only two currency unions on the African continent under the West African CFA franc (XOF) and the Central African franc (XAF). Although separate, the two currencies have always been at parity and are effectively interchangeable.17 Our analysis focused on the West African CFA franc to understand what the integration under one monetary system has meant for its members’ economic stability and regional economic activity. A special focus was on the question of whether integration has led to the promise of increased levels of regional trade or investment, similar to what has been observed among member countries after the establishment of the EU.18 We also looked at how WAEMU compares in these areas with other regional economic communities (RECs) on the continent.


WAEMU consists of eight relatively small states with similar market structures of which all but Guinea Bissau (Portuguese) share French as an official language.19 Some annual economic statistics of WAEMU's member countries (before Covid-19) are summarized in the table below.

Table 1: Overview of WAEMU member countries

Table displaying WAEMU member countriesSource: World Bank Database, Atlas of Economic Complexity

Apart from Ivory Coast, member states’ trade balance over the past 20 years has been consistently negative (see Graph 1). WAEMU states also perform relatively poor on Economic Complexity measures, as captured by the Economic Complexity Index (ECI) and Complexity Outlook Index (COI) in Graph 2. The ECI summarizes a country’s capabilities as regards production possibilities while the COI reflects the availability of good diversification opportunities for its export basket. The graph shows that WAEMU states have remained within the negative ECI and COI zone indicating little space to improve and few opportunities for economic diversification. For most WAEMU countries, the arrows also direct to the lower left of the graph, meaning that countries have become even less complex between 2015-19.

Graph 1: Trade balance of WAEMU countries from 1996-2019

Graph depicting trade balance of WAEMU countries from 1996-2019

Graph 2: ECI and COI evolution of WAEMU countries between 2015-2019

Graph depicting ECI and COI evolution of WAEMU countries between 2015-2019


We compared WAEMU's export structure with other RECs on the continent to see if there was any visible impact of sharing the CFA franc as currency on trade. The following table gives an overview of the selected RECs.

Table 2: Overview of RECs included in the Analysis

Table providing overview of RECs included in the analysisNote: RECs in Africa that are not included are The Community of Sahel–Saharan States (CEN-SAD), The Intergovernmental Authority on Development (IGAD), The Arab Maghreb Union (AMU) and The Southern African Customs Union (SACU). All information is based on own desk research.

As regards the economic development level, SADC, COMESA and ECCAS show a higher average income level, reaching a GDP per capita (current $) of over $2,500 GDP in 2019.20 For ECOWAS, WAEMU and EAC it was below $1,500. Unemployment has been especially high among SADC states (above 10% on average since 1999) while it was lowest (below 5%) in EAC and WAEMU. Average Inflation in WAEMU has been relatively low and remained below 5% since 2010. Since 2010 external debt in all RECs has been rising. The government’s debt burden was highest in COMESA, ECOWAS and EAC in 2019, with average debt levels of above 50%.

The composition of export baskets varies but it is in all RECs dominated by minerals, non-transformable commodities, and agricultural products, which are not integrated in regional supply chains and are hence shipped abroad (see Graphs 3 & 4). Exports in ECOWAS and ECCAS have mainly (>=60%) consisted of minerals. Minerals export in SADC and COMESA has been less significant but was still high (~1/3). In WAEMU, agricultural products (cocoa, raw cotton, cashew, and cocoa nuts) dominate the export basket, followed by stones (primarily gold). Interestingly, WAEMU also has the highest share of chemical products that is exported (Senegal, for example, exports 8% of the world’s phosphoric acids used in fertilizers21 ). With $9.6 billion in total export value in WAEMU and $38.5 billion in ECOWAS, Europe remains the primary trade destination in West Africa, accounting for 39% of all exports in both RECs. For East and South African blocs, Asia has overtaken Europe as the primary export destination. In ECCAS, Asia makes up as much as 77% of all exports. With 29% the EAC has had the highest share of exports within the African continent.

Graph 3: What did RECS export in 2019?

Graph 3 depicts exports of RECS in 2019

Graph 4: Where did RECS export to in 2019?

Graph depicting where RECS exported to in 2019

Graph 5 compares the share of regional, which means REC-internal and Africa-internal, exports for the period 2014 to 2020. Community-internal export was highest among SADC and EAC countries, with 20% and 16% of internal exports in 2020 respectively. Despite the promise of facilitated trade through a common currency, WAEMU’s internal trade business did not stand out, neither REC-internally nor for exports to the continent, and it was mainly reliant on refined oil. It was equally low in per capita terms, in contrast to SADC for example.

Graph 5: Regional exports 2014-2020

Graph 5 depicts Regional exports 2014-2020

Graph 5 depicts Regional exports 2014-2020

Graph 6: Regional FDI flows 2003-2019

Graph depicting regional FDI flows from 2003-2019

Graph depicting regional FDI flows from 2003-2019

Note: Calculations are based on investment deal announcements as captured by fDi Markets.  

WAEMU has similarly not attracted more bloc-internal investment (Graph 6). Between 2003-2019, the group’s internally announced deals were only a small fraction (<10%) of the deals within EAC, which is a grouping of a similar size. REC-internal announcements were most frequent in SADC where almost 400 projects of more than $25 billion were planned. WAEMU lags similarly behind in generating investments from the continent as a whole. Again, investors’ interest was concentrated in SADC where more than 3,200 deals of $1.25 trillion from Africa were reported. Interestingly, the volume of capital inflow from outside Africa focused on COMESA. Across all RECs, investments centralized in the financial and business services sectors (as reflected by # of deals) while the coal, oil, gas, and metals sectors received the most capital.


The experience of WAEMU shows that the formal establishment of a free trade (and single currency) regime alone does not automatically imply an increase in economic activity across member countries. We found that WAEMU-internal and Africa-wide trade has remained relatively limited. This is likely because other serious barriers continue to exist beyond those impacted by trade terms and a shared currency, including the well-documented lack of necessary logistical networks, and streamlined procedures for customs in the region. The insecurity in border areas, for example in Eastern Burkina Faso’s area close to Togo and Benin, has also become a major concern that is hindering smooth transportation in the area22. It is commendable that regional communities and trade facilitation agreements have formed and continue to exist across the continent. But these agreements are not sufficient to increase trade and investment on their own. This is true for both internal trade and investment within the community and the ability of the community to attract transformative business investment from outside. This suggests that larger trade agreements like AfCFTA may lead to limited impact only if negotiated policies and terms that aim to facilitate trade and capital flows lack a system of strict enforcement and external circumstances, such as infrastructure and security, remain unfavorable23.

Julia Conrad is currently pursuing a Master in Public Administration degree at Harvard Kennedy School (2023). Previously, she worked for five years at the International Finance Corporation (World Bank Group) in Dakar (Senegal), where she managed a portfolio of micro- and agriculture finance projects across Africa. Her studies at Harvard have focused on Infrastructure Development, Development Policy, and Climate Change. She also has a BSc in International Economics from the University of Tuebingen and a MEc in World Economics from the University of Finance and Economics in Shanghai.


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2Website of the Economic Community of West African States. "Member States." https://ecowas.int/?page_id=381 (last visited: 23 July 2022)

3 Britannica Online Encyclopedia. "Economic Integration." https://www.britannica.com/topic/economic-integration(last visited: 23 July 2022)

4 Frankel, Jeffrey A. & Andrew K. Rose. "Estimating the Effect of Currency Unions on Trade and Output." Quarterly Journal of Economics CXVII, 2 (May 2002): 437-466. https://www.nber.org/papers/w7857(last visited: 23 July 2022)

5Glick, Reuven & Andrew K. Rose. "Does A Currency Union Affect Trade? The Time-Series Evidence." European Economic Review, 2002, v46 (6 June): 1125-1151. https://www.nber.org/papers/w8396 (last visited: 25 July 2022)

6 Micco, Alejandro, Ernesto Stein, Guillermo Ordoñez, Karen Helene Midelfart & Jean-Marie Viaene. "The Currency Union Effect on Trade: Early Evidence from EMU." Economic Policy 18, no. 37 (2003): 317–56. http://www.jstor.org/stable/1344738 (last visited: 25 July 2022)

7 Pilling, David. "A revolution in Africa’s relations with France is afoot." Financial Times. 31 December 2019.  https://www.ft.com/content/8894ad6e-2650-11ea-9a4f-963f0ec7e134 (last visited: 25 July 2022)

8 Website of the West African Economic and Monetary Union. "The Amended Treaty." http://www.uemoa.int/en/amended-treaty(last visited: 25 July 2022)

9 Ouattara, Alassane D. "The West African Economic and Monetary Union (WAEMU) - Facing the Challenges of the Future." IMF. 30 June 1998.  https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp063098(last visited: 25 July 2022)

10Pangea Risk. "Special Report: Africa's Common Markets Compete for Trade and Investment." 8 March 2021. https://www.pangea-risk.com/wp-content/uploads/2021/03/SPECIAL-REPORT-AFRICAS-COMMON-MARKETS-COMPETE-FOR-TRADE-AND-INVESTMENT.pdf(last visited: 25 July 2022)

11Samba Sylla, Ndongo. "Moving forward to African Monetary Integration." Africa Development/Afrique et Développement, 2020, Vol. 45, No. 2 (2020): 39-58. https://www.jstor.org/stable/26979255(last visited: 25 July 2022)

12 Pilling, David. "A revolution in Africa’s relations with France is afoot." Financial Times. 31 December 2019.  https://www.ft.com/content/8894ad6e-2650-11ea-9a4f-963f0ec7e134(last visited: 25 July 2022)

13Mieu, Baudelaire. "France begins transfer of €5bn to BCEAO as part of CFA franc reform." The Africa Report. 5 May 2021. https://www.theafricareport.com/85566/france-begins-transfer-of-e5bn-to-... (last visited: 25 July 2022)

14 Wilson, James. "The CFA franc reforms are more symbolic than transformative." LSE Blog. 19 March 2020. https://blogs.lse.ac.uk/africaatlse/2020/03/19/cfa-franc-reforms-monetar... (last visited: 25 July 2022)

15 Mugabi, Isaac. "West Africa's Eco currency plan remains a pipe dream." Deutsche Welle (DW). 2 July 2021. https://www.dw.com/en/west-africas-eco-currency-plan-remains-a-pipe-drea... (last visited: 25 July 2022)

16Ogbalu, Mike III. "Boosting the AfCFTA: The role of the Pan-African Payment and Settlement System." Brookings. 11 February 2022. https://www.brookings.edu/blog/africa-in-focus/2022/02/11/boosting-the-a... (last visited: 25 July 2022)

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19Website of the BCEAO. "Member States." https://www.bceao.int/en/etats-membres (last visited: 25 July 2022)

20One must note that differences of income level are enormous REC-internally. For example, in COMESA and SADC, the Seychelles' GDP per capita (current $) was more than 34-times that of Mozambique. In ECCAS, Equatorial Guinea's per capita GDP was even than 37-times that of Burundi.

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22 Salau, Sulaimon. "Poor infrastructure, insecurity hinder cross-border trade." The Guardian. 8 May 2022. https://guardian.ng/business-services/poor-infrastructure-insecurity-hin...(last visited: 25 July 2022)

23USAID. "West Africa Regional: Economic Growth and Trade." Last updated 21 July 2022. https://www.usaid.gov/west-africa-regiona/economic-growth-and-trade (last visited: 25 July 2022)