Impacts of the African CFA Franc devaluation on cereal yields and food security in West Africa

Abstract

In January 1994, all member countries of the African Financial Community (CFA) devalued 50 percent of their local currency in order to regain their competitiveness on the world market and increase their exports for sustainable economic growth. Nevertheless, a common side effect of devaluation is a one-off rise in prices leading to a decline in local purchasing power and a scarcity of goods. Consequently, the policy makes it more difficult for the local population to buy or access their usual amount of cereals for consumption. Especially when staple foods account for 70-80% of the daily diet in the region. In addition, any prolonged shortage of cereals on the local market could compromise food security and lead to the common form of malnutrition known as under-nutrition. Therefore, in the absence of randomization of the treatment, a difference in difference (DID) quasi-experimental method is applied to estimate the effects of the CFA devaluation on member countries' cereal yields and food security. The findings show a slight increase of 172 kg per hectare in cereal yields in the devalued area. In addition, to assess food security, countries' food balance sheets were used to evaluate the daily per capita food supply from major cereals consumed locally. The results showed an increase in the daily supply of maize (120 kcal per capita) and rice (129 kcal per capita) in the CFA area, as confirmed in previous studies and a slight decline of the daily supply of sorghum (65 kcal per inhabitant) and millet (26 kcal per inhabitant). Other factors such as strong demand for maize imports, reduced rice import taxes and a substitution effect between millet and rice in devalued countries have contributed to the results. In conclusion, the devaluation of the CFA currency has not contributed to food insecurity. However, it has changed the basic food consumption behavior of CFA region local population with higher rice and maize consumption. Key words: Currency, Devaluation, Food, Cereal, Yields, Africa, Development, Consumption, Exports, Difference in Difference