Burkina Faso is a West African nation, formerly a French colony. The country became a fully independent nation in 1960, two years after the establishment of the Republic of Upper Volta. The name Burkina Faso was adopted in 1984. Burkina Faso is an average country economically that uses the West African franc as its currency. The currency is shared with eight other West African countries including Benin, Guinea-Bissau, Mali, Ivory Coast, Senegal, Niger, and Togo. The use of a common currency among these countries has improved the regional economic development and stability of the currency. Establishment of a fixed exchange rate with the euro secures Burkina Faso from extreme effects of market changes, thus improving the ability to conduct trade with Eurozone nations. With an inflation rate of about 3% in Burkina Faso, the West African franc is one of the most stable currencies in West Africa.
The West African Franc
The West African Franc -CFA, ISO code XOF, is the currency used by eight West African countries, some of which were formerly colonized by France. The countries are also members of the West African Monetary and Economic Union, a sub-regional bloc of ECOWAS. The introduction of the West African franc in 1945 was influenced by the decline of the French West African franc in the aftermath of the Second World War. The Institut d’Emmision de l’Afrique Occidentale Françoise et du Togo initially issued the currency until its replacement by the central bank of West Africa in 1959. The West African Franc has a fixed exchange value of one euro to 655.957 CFA francs. The currency also has an equal value to the Central African franc. The Central African Franc is similar to the West African franc but is used in former colonies of French in the central African region. The two currencies share the CFA abbreviation but differ in their ISO codes. The Central African Franc is coded XAF.
Denominations and Exchange Rates
The West African Franc has 100 subunits called centimes (c). The Central Bank of West African States is based in Senegal and has the exclusive responsibility of issuing the currency. Since the introduction of the West African franc, several denominations have been created both in coin and banknote form. The coins were made of various materials including aluminum, bronze, copper, nickel, steel, or a combination of these materials. Currently, coins are in denominations of 1, 5, 10, 25, 50, 100, 200, 250, and 500, with banknotes existing in denominations of 500, 1000, 2000, 5000, and 10,000 francs. The West African franc exchanges with the euro at a rate of 655.957 CFA francs for one euro. The West African franc exchanges with the US dollar at a rate of 1XOF:0.001731US$.
In recent years, various governments within the West African franc bloc have called for the introduction of a new currency, stating the ineffectiveness of the West African franc for export trade. The fact that the French Treasury backs the currency has been interpreted by the West African states as continued influence by France on the economies of these countries. While the currency provides economic stability to these countries, it limits the value of export trade, particularly to Eurozone countries.