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...that would be a good reason to deny citizenship AT THIS TIME. But once she became aware of the rights and responsibilities of French citizens, she should be allowed to re-apply.
But to deny citizenship for wearing the niquab? If it's her husband/other male relatives forcing her to do so, why punish the victim? If it is truly her choice, let her. What someone else wears for religious reasons is none of my business, however much I may disagree with it.
Does France deny citizenship to Hasidic Jews, who in accordance with their religious beliefs wear very distinctive clothing and have distinct roles for men and women?