Africa considers single currency

March 2, 2009
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, NAIROBI, Kenya, Mar 2- The Africa Union (AU) will expedite plans to establish a continental Central Bank which will be headquartered in Abuja, Nigeria, a senior official has revealed.

AU Commissioner of Economic Affairs Dr Maxwell Mkwezalamba told the first congress of African economists on Monday that a Joint Technical Committee in conjunction with the Association of African Central Bank Governors was working on how to create the bank.  The economists are meeting in Nairobi for a four-day conference towards creation of a single African currency.

“Discussions are ongoing with the Nigerian authorities to sign a Memorandum of Understanding for the hosting of a Technical Steering Committee to undertake implementation studies on the Bank,” he disclosed.

The formation of this bank is in line with Article 19 of AU Constitutive Act on the creation of three financial institutions including the Bank, Africa Investment Bank and African Monetary Fund.

He said a Monetary Institute which would work out the policies that these countries would adopt should be in place in the next two to three years.

Details of how much influence the Bank would have on the member states as well as what relationship it would have with the national Central Banks would be worked out, he added.

Dr Mkwezalamba said the setting up of the Bank would set the stage for the creation of a single African currency. This however would only be possible if there was free movement of people, goods and services.

He observed that when this is achieved, it would enable African countries to address some of the challenges they face in a co-ordinated way and also accelerate the integration process.

“For integration to yield benefits, greater volumes of trade among the members must take place. Hence, Africa must enhance efforts towards breaking down existing barriers and one of the key elements of such a move would be the elimination of multiple currencies,” he maintained.

While opening the congress, Planning Minister Wycliffe Oparanya acknowledged that the process was ambitious and would take some time to achieve as it hinges on the sovereignty of partner states.

He was however optimistic that although the creation of the Africa Investment Bank and Monetary Fund could be easier, these processes called for a practical approach to accelerate their establishment.

While pointing to the current financial crunch, he added that these institutions would aim to protect Africa from the impact of such crisis and allow the continent to anticipate similar catastrophes.

“The formation of a regional monetary fund could act as a useful first step to enhance cooperation in currency stabilisation. This would then serve as a complementary vehicle to the process of monetary integration,” he proposed.

Despite the challenges that lay ahead, Mr Oparanya emphasised that African countries need to persist in their endeavour to ensure that they succeed in the introduction of a common currency.

“A common currency in itself symbolises the success of African integration. It is envisaged that a single currency would help reduce the cost of doing business on the continent and also promote cross border trade and investments,” he argued.

He added that issues such as to whether Africa should follow the European or American models or whether it should explore new approaches based on “African realities’ would have to be addressed.

“This forum can therefore be useful in pointing out what measures and benchmarks are ideal for Africa if we aspire to have one currency,” Mr Oparanya said.

He challenged economists and other African researchers to be at the fore front in providing strategies and advice to Africa’s decision makers at national, regional and continental levels.

This he concluded would assist the governments to come up with policies that would help solve the continent’s problems.

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