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African single currency: The Great White Hope for a New Africa

Posted: Apr 9, 2014 at 12:00 am / by / comments (0)

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By Rasheed Alao

For a new and united Africa, one single currency is imperative. The adoption of the single currency could be the dawn of a new beginning for Africa. Every economic bloc, region and continent of the world is crucial with adopting a single currency for the purpose of economic, monetary and political union.

African central bank governors at various fora have been canvassing for the introduction of a single continental currency to be called the Afro (as some prefer it to be Afriq) no later than December 2025, to rival other global currencies, as the continent seeks to become a world economic power.

On the overall, only the European continent operates a successful single currency called the Euro, the world second largest reserve currency, which was introduced in 2002 while the regional West and Central African CFA franc was introduced in 1961 and 1972 for the West and Central African Francophone countries respectively. The Euro from the Eurozone, which consists of 18 of the 28 member-states of the European Union was officially adopted on 16 December, 1995, introduced to world financial markets as an accounting currency on January 1,1999, while Euro coins and banknotes entered circulation on January 1,2002, with a road-map of seven years, 1995-2002.

The Abuja Treaty, an international agreement, which was signed on June 3, 1991, in Abuja, created the African Economic Community (AEC), called for the establishment of African Central Bank (ACB) with a plan to produce a single currency by 2023 later extended to 2025. The introduction of Afro single currency will be preceded by the creation of monetary unions in five existing regional economic communities namely: the West African Economic and Monetary Union (WAEMU), the Economic and Monetary Community for Central Africa (CAEMC), Arab Monetary Union (ArMU), Southern African Monetary Union (SAMU) and East African Monetary Union (EAMU), all under umbrella of African Monetary Union. The proposed single currencies in Africa are ECOWASEco in 2020, EAC Shillingin 2024, SADC currency in 2018, Gulf Cooperation Council (GCC) Khaleeji and North America Amero. The 1999 Sirte Declaration in Libya called for a speeding up of this process with creation of African Central Bank (ACB) by 2020. When it is fully implemented through Pan-African Parliament legislation, an organ of African Union in South Africa, the ACB will be the sole issuer of the African single currency and also act as banker of the African Government. The G3, or the first three economies from each of the five existing regions that meet the set primary and secondary convergence criteria may, as pioneers, kick-start the African single currency in 2025 while others will follow suite as they make up the criteria. For the Afro to be implemented, the criterion has to be set out by the African Monetary Union (AMU), which must be achieved by intending members. In the same parlance with some of the regional convergence criteria, the primary criteria from AMU could be a single-digit inflation rate at the end of each year, a fiscal deficit of about four per cent of the GDP, a central bank deficit-financing of about 10 per cent of the previous year’s tax revenues, gross external reserves that can give import cover for a minimum of three months. Secondary criteria could be a stable real exchange rate, a positive real interest rate, and prohibition of new domestic default payments and liquidation of existing ones, among others.

The single money proposal was disapproved by some African nations and viewed the movement-feasible and unworkable with a belief that the movers had personal and hidden agenda. Some saw it as an opportunity for African ‘tigers’ to become gainers while ‘flies’ will be significant losers. Other feelers belief Afro introduction is unpractical due to Africa’s varied backgrounds in terms of customs, language, culture, growth, foreign policies and so on not knowing fully well that the European countries of different backgrounds and disparities implemented Euro single currency against all odds in seven years, 1995-2002.

Why the quest for monetary union? There are three basic reasons for the enthusiasm for African monetary union. The trio of which transcend the conventional aims of higher economic growth, single-digit inflation and the continental unity, as suggested by the then Organization of African Unity (OAU), which was created in 1963 and also retained the priority when OAU was transformed into African Union (AU) in 2001. Benefits accruable from adopting a single currency for Africa are clustered around the stated three basics – growth, single-digit inflation and unity. The breakdown further include but not limited to the following: (a) Irrespective of distance, single currency will enable African countries stand tall on a strong footing and relate as a one and united family. (b) One money could better intercontinental trade relationships by reducing cost of exchange rates for many countries, (c) With a stable single currency for Africa, influx of Foreign Direct Investment would be guaranteed from all walks of life, (d) Africa could use non-bloody Afro-tool to resolve conflicts in order to ensure stability in the continent, (e) In case of coups and counter coups, Afro currency can be used as a bloodless weapon to restore and defend democracy in Africa,(f) Through a single currency, there will be a greater integration which will foster economic growth and boost efficiency, (g) payment system are expected to speed-up cross border payment and promote trade, (h) Africa will be empowered to collectively act against perceived financial and economic aggression the continent faces from external forces, (i) fear of devaluation of individual currencies will be allayed as Afro will stand firm for all currencies at foreign exchange market,(j) The Afro unity money will undoubtedly create a borderless Africa for all AU citizens. Like Schengen visa in Europe, international travellers holding Afro visa will be able to travel across all African countries while AU citizens will have their visa waived. With Schengen visa, I freely tripped from Germany to France and to Switzerland in Europe without any hindrance December, 2013, and (l) with the presence of influential countries such as Nigeria, South Africa and Egypt in the Afrozone, it will not be too uneasy to deal with any country that may proof naughty.

The Afro notes of different denominations will be honoured and immortalised with the portrait of the foremost Pan Africanists, abolitionists and fallen heroes who made Africa great from the West, Central, East, North and Southern Africa and in the Diaspora. For fair representation, at least one African leader must be presented for immortalisation from each of the five existing regions for Afro notes and coins inscription. This write-up suggests the following names. The Nigerian OlaudahEquiano or Gustavus Vassa(1745–1797), the Malian Mansa Abubakar II (13th century) and the Ghanaian Harriet Tubman (1820–1913). Others are the South African Shaka Zulu (1787-1828), Nelson Mandela (1918-2013), the Ethiopian Balqis, Queen of Sheba (1000 BC), Martin Luther King Jnr, (1929–1968), Black Nationalist Marcus Garvey (1887–1940) and Professor Chinua Achebe (1930-2013), novelist and poet. The performing illustrious sons and daughters of Africa who has excelled worldwide in their careers, professionally honoured at home and abroad and also received global accolades should also be inclusive. The respected, African achievers whose portrait also deserve to bear the Afro notes are suggested below: Professor Dibu Ojerinde, first African Professor of Tests and Measurement in 1986 and Registrar/CE, Joint Admissions and Matriculation Board (JAMB), Abuja and Professor Wole Soyinka, first African recipient of Noble Price in Literature in 1986.

From the table below, columns (1-3) presents the existing regional monetary unions:(1) the West African Economic and Monetary Union(WAEMU) members (2) the Economic and Monetary Community for Central Africa (CAEMC) members and (3) Common Monetary Area (CMA) members respectively while columns (4-6) are proposals for the West African Eco, East African shilling and SADC single currencies in year 2020, 2024 and 2018 respectively.

Fourteen (14):Angola, Botswana, Democratic Republic of the Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.

Note: West African Economic and Monetary Union, WAEMU (1) and Economic and Monetary Community for Central Africa, CAEMC (2) are two subzones of the CFA franc zone with headquarters in Dakar and Yaoundé respectively.

Source: Writer’s compilation

At this pertinent juncture, Africa will undergo unity test as other AU members may lure some countries against each other in order to truncate the unity money. Therefore, for quick implementation of Afro, this write-up recommends that the African Union (AU) chairperson and Ethiopian Prime Minister, Mr Hailemariam Desaleg nneed to sensitise all AU members on the accruable economic, monetary and political benefits that avail the continent and also compel the five existing regional economic communities–Economic Communities of West African States (ECOWAS), Economic Community of Central African States (ECCAS), Arab Maghreb Union (AMU), Southern African Development Community (SADC) and East African Community (EAC) to finalise and introduce their proposed regional currencies latest 2024 as the African Afro is billed to be readied by 2025.

• Alao is a lecturer in the Department of Economics, Adeyemi College of Education (ACE), Ondo, Nigeria. 08055795353 [email protected]

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