As a consultant to the African Union Commission, I wrote this paper on its currency integration. In my doctoral program on banking and finance, I did works on economic integration and currency with layers of technology. That remains my appreciation to defunct Diamond Bank which funded that program.
This push for a single currency stands for an Africa of unity, integration and strength. However, there is a huge possibility of potential failure of a single currency if implemented haphazardly with enormous consequences to not only Africa’s global image but also for individual countries’ economies and, ultimately, the people.
A single African currency has many promises in terms of boosting trade across the continent and benefits for all member states through synergy and symbiosis. It has the capacity to increase economic cooperation among member AU nations and stimulate faster development efforts across the continent (Debrun, 2002). Many African nations are still oriented in trade toward former colonizers in Europe than immediate neighbors and across African capitals; there is an understanding that currency unification could be a key catalyst to transforming the continent.
The major challenge is how the continent could develop the plan to have this unified monetary union considering the opsided economic structures among the nations, which can affect response strategy during economic crises. This is fundamental as if major regional economic powers stay out of this unification for fear of being net losers, it could have adverse effects to realizing the continental goal.
Sure, I am all electrons now. But I cannot forget this paper which was extremely critical during the debate. I made my point that before Africa could have a single currency, it must first have prior convergence of the regional economies. Typically, currency union results to loss of sovereignty (for union members) of using traditional tools to drive monetary policies since a supranational bank formed from the union becomes the collective driver. If the integration fails, the result would be massive welfare losses to citizens. (This is one reason I am asking for caution on ACFTA; we need to get the “rule of origin” right).
With Facebook Libra, the game plan has changed as I had noted. Meanwhile, I am working on a Harvard Business Review piece on how Libra will affect Africa’s economy.