(Ecofin Agency) - In Nigeria, the rapid adoption of the redesigned bank notes has accelerated demand for the CFA Franc in the States neighboring CEMAC and WAEMU countries even though those states are not covered by the central banks of the two CFA zones.

In five Nigerian states, several communities and economic agents are now using CFA Franc to settle their commercial transactions, many local media reports. The new development follows the naira scarcity that ensued with the ongoing introduction of redesigned banknotes.

According to Punch NG, the states concerned are Sokoto, Zamfara, Katsina, Adamawa, and Kwara. All five share borders with CFA Franc countries.  Sokoto, Zamfara, and Katsina share borders with Niger while Kwara shares a border with Benin, and Adamawa shares a border with Cameroon. Those states use CFA Franc in some of their commercial transactions given the importance of their exchange with WAEMU countries (and CEMAC in the case of Cameroon).

However, the use has intensified in recent days with the short deadline given by the Central Bank of Nigeria to exchange the old banknotes against the redesigned ones. According to a cattle dealer quoted by Punch NG, merchants now only accept the redesigned notes to avoid being left with stashes of the old notes. But since the new naira notes are not readily available, CFA Franc is becoming their haven.

 The potential demand for the CFA franc arising from this situation is not easy to estimate, as such transactions often take place in informal settings, but should the naira scarcity persist, it could distort the monetary policies of BCEAO and BEAC (the two central banks of countries using the CFA Franc), which base those policies on economic situations of CFA countries.

It is worth noting that the use of CFA Franc, by economic agents, is not caused by the naira scarcity only. The Nigerian currency strongly lost its value on the black market, which fuels most foreign exchange transactions, prompting border traders to demand the CFA franc which is relatively stable.

CFA Franc is not the only haven for Nigerians, nevertheless. The digital currency Bitcoin is also widely adopted despite the price drop it recorded in 2022. In the country, Bitcoin is exchanged at prices exceeding its official value.