The vision of a single African currency has long been a cornerstone of the African Union's (AU) agenda for deeper economic integration and enhanced unity across the continent. This ambitious plan, often referred to as the Single African Currency Programme, aims to create a unified monetary system that would replace the more than 40 different currencies currently in use across Africa. The goal is to foster economic growth, stability, and regional unity, ultimately positioning Africa as a stronger player in the global economy.

The Historical Context and Vision

The idea of a single African currency dates back to the formation of the Organization for African Unity (OAU) in 1963, which later evolved into the African Union in 2001. The Abuja Treaty, signed in 1991, set a timeline for the establishment of an African Economic Community, including a single currency, by 2028. The African Union's Agenda 2063 further emphasizes the importance of economic integration and a single currency as a means to achieve sustainable development and prosperity.

The Benefits of a Single African Currency

Enhanced Economic Integration

One of the most significant benefits of a single African currency is its potential to enhance economic integration by simplifying trade across the continent. Currently, Africa's multiple currencies and exchange rates create barriers to the smooth flow of goods, services, and capital across borders. A single currency would eliminate the need for currency conversion, thereby reducing transaction costs and making cross-border trade more efficient.

Increased Trade and Investment

A unified currency would also serve as a catalyst for boosting intra-African trade, which remains significantly lower compared to other regions such as Europe and Asia. By streamlining transactions and eliminating exchange rate fluctuations, a single currency would make it easier for businesses to operate across multiple African countries. This would not only increase the volume of trade within the continent but also create a more integrated and competitive African market.

Monetary Stability and Economic Growth

Africa's current monetary landscape is characterized by significant exchange rate volatility, with many smaller and less stable currencies particularly vulnerable to external shocks. A unified currency would mitigate these risks by providing a stable and predictable monetary environment, reducing the likelihood of currency crises and inflationary pressures.

Improved Fiscal and Monetary Cooperation

A single African currency would improve fiscal and monetary cooperation among member states. This, in turn, would lead to cooperation and integration on other levels, such as cultural, societal, and economic. Countries would no longer be able to finance deficits through printing more money, which would enhance the external credibility of governments' policies.

Challenges and Considerations

Economic Divergence

One of the main challenges in implementing a single African currency is the significant economic divergence among African countries. Countries differ in terms of economic power, inflation rates, fiscal deficits, and debt levels. Coordinating monetary and fiscal policies across such diverse economies is a complex task.

Political and Economic Leadership

The success of a single currency project requires strong political and economic leadership. In West Africa, for example, Nigeria's economic weight gives it significant bargaining power, but its commitment to the Eco project has been ambivalent. The withdrawal of Burkina Faso, Mali, and Niger from ECOWAS in January 2025 further weakens the organization and raises questions about the alignment of these countries with the Eco project.

Regional Monetary Unions as a Stepping Stone

The African Union's strategy relies on the prior creation of monetary unions in five existing regional economic communities. These regional unions would serve as an intermediate stage, leading ultimately to their merger and the creation of a single African central bank and currency. However, the feasibility and desirability of a full African monetary union have been questioned. Selective expansion of existing monetary unions, such as the CFA franc zone and the Common Monetary Area (CMA) in Southern Africa, could be a more feasible approach.

The Role of Technology and Innovation

The digital transformation of Africa's economy presents both opportunities and challenges for the single currency project. The Pan-African Payment and Settlement System (PAPSS), an initiative by the African Export-Import Bank, aims to establish a clearinghouse payment platform that utilizes national currencies. This system, which leverages FinTech solutions, could serve as a viable alternative to a single currency while still enhancing financial inclusivity and accessibility.

Conclusion

The Single African Currency Programme represents a bold vision for Africa's economic future. While the benefits of a unified currency are clear, the path to achieving this goal is fraught with challenges. Economic divergence, political leadership, and the need for strong regional monetary unions are all critical factors that will determine the success of this ambitious project. As Africa continues to strive for greater economic integration and unity, the single currency remains a powerful symbol of the continent's aspirations for prosperity and self-reliance. The journey towards a single African currency is ongoing, and it is through careful planning, collaboration, and innovation that Africa can realize this transformative vision.

Keywords: Single African Currency, African Union, Economic Integration, Monetary Stability, Regional Trade, Digital Economy

Internal Links: African Union Agenda 2063, African Continental Free Trade Area (AfCFTA)

External Links: IMF - A Single Currency for Africa?, LSE Blogs - Why has West Africa's plan for a common currency yet to become a reality?