Senegal is a West African country with an economy dependent on agriculture and export trade. Senegal is a member of several economic forums such as the World Trade Organization, ECOWAS, and the West African Economic and Monetary Union (UEMOA). The country uses the West African CFA franc as the legal tender. Senegal depends on economic aid from developed nations. The headquarters for the West African States’ Central Bank is based in Dakar, the capital city of Senegal.
The French West African franc
The West African colonies of France used the French West African franc as their currency. The currency was introduced in the colonies in 1903 and used until 1945 when CFA franc was introduced. The Bank of West Africa distributed the coins and notes of the currency in various denominations. Coins were made from aluminum and bronze and came in denominations of 50 centimes and 1 franc. Notes came in denominations of 1, 2, 5, 10, 50, and 1000 francs.
The CFA franc
The CFA franc is the currency used by a group of 14 countries within Central and West Africa. Those in central Africa use the Central African CFA franc while those in West Africa use the West African CFA franc. In theory, the two currencies are the same and have an equal value with the difference being in their geographical regions of use. Senegal uses the West African CFA franc as its official legal tender since its introduction in 1945. The currency is shared between eight West African states that form the African Financial Community. The currency is abbreviated as XOF with the symbol CFA. Each franc has 100 divisions called centimes (c). The central bank in the regional States issues the West African CFA franc in various forms and values. The coins of the CFA are in denominations of 1, 5, 10, 25, 50, 100, 200, 250 and 500 francs while banknotes exist in values of 500, 1000, 2000, 5000, and 10000 francs. The CFA franc is pegged to the euro at a fixed exchange rate of 655,957 CFA francs for every euro. With the US dollar, the currency exchanges at a rate of 0.001731 US dollars for every West African CFA franc.
The institution of economic reforms in the 1990s led to a 50% devaluation of the CFA franc which raised the inflation rates, especially for imported goods. The exit of the Senegalese society was also a result of the devaluation. However, the reforms saw an increase in the growth of the GDP and eventually the reduction of the inflation rates.
Senegal is one of the first African countries to introduce a digital currency both in Africa and abroad. The eCFA was developed through collaboration between the eCurrency Mint Limited and the Banque Regionale de Marches. The currency, launched in 2016 and set to be in circulation in 2017, is a unique creation of digital currency in that the central bank has control over the supply of money. The currency is also bound by e-money regulations by the Central Bank of West African States. The Senegalese currency offers a lot of flexibility in use as the currency and makes transactions across different banks and mobile money platforms possible.