A Unified Future: Exploring Africa's Currency Evolution in Six Hours at #AGSEF2024

This year's AFRICAN GOVERNMENT STAKEHOLDERS ENGAGEMENT FORUM (AGSEF) 2024 delivered a compelling conversation around the theme, Monetary Policy and the Unification of African Currencies. As the forum continues to serve as a powerful platform for Africa’s leaders and policymakers to drive critical discussions, this year’s edition stood out with its visionary focus and actionable takeaways.

Opening the forum, the moderator, Adaobe, set the tone by reminding participants that AGSEF is more than just another conference; it’s a convergence of key stakeholders from all over Africa, working toward a united vision for the continent. "We are a collaboration," the moderator emphasized, "building a system where all African nations contribute to the drive we want to see in Africa."

Why Unification of African Currencies?

The highlight of this year’s forum was the robust discussion on the unification of African currencies, a conversation that’s timely as the continent navigates regional trade complexities. The launch of the African Continental Free Trade Area (AFCFTA) brought to light one of the biggest bottlenecks faced in intra-regional trade: currency differentiation. Trade within Africa often requires foreign currencies such as the US dollar, euro, or pound, which complicates the process and limits economic growth.

One of the event conveners, Mrs. Just Omomo Ibe , called on the participants to reflect on the continent's future: "Every single area or sector in Africa requires the intervention of unification. The discussions here today must cascade into our everyday lives. Change starts with individuals—becoming ambassadors for change in your business, job, and government roles is essential." Her powerful words struck a chord, urging participants to think about how Africa can build trust in its own currency, just as other economic blocs have.

Miss Edith Wangare Njage, MSc, MIB, FPWMP? , Chief Steward at Arielle for Africa LTD and event convener, set the tone for AGSEF 2024 by addressing the fundamental issue of currency in Africa's trade relations. She highlighted the hurdles businesses face due to currency fluctuations and pegging everything to the US dollar, which has resulted in what she termed "slippage." African businesses are often forced to trade in dollars, leading to inflation and unnecessary transaction costs.

“We have massive slippage in Africa, and banks are making a lot of the money that should stay with entrepreneurs. This inflation of the dollar affects us—when the U.S. sneezes, Africa gets asthma.”

A Step Towards Africa's Monetary Integration

During the engaging session at AGSEF 2024, Professor Ndubuisi Ekekwe highlighted the importance of tackling the regional frictions within Africa's economies to move toward a single African currency. His powerful argument was that monetary integration could lead to more favorable trade negotiations, drive foreign direct investment, and promote fiscal discipline. However, he also cautioned that Africa’s economic heterogeneity poses significant risks, warning that fiscal indiscipline in one country could trigger welfare losses across others. The session underscored the pivotal role of companies in overcoming Africa's challenges, with markets being key vehicles for change.

"Market systems are the vehicles through which we fix the frictions in our communities, states, and nations—companies must help solve these challenges as we work towards monetary union." – Professor Ndubuisi.

Navigating the Future of African Economies

Dr. Vera Songwe stated, “So there is a part of your national sovereignty that you give away to be able to be part of that whole,”

illustrating the delicate balance between national interests and regional unity. The discourse underlined the importance of learning from East Asia, where economic growth thrived without a unified currency, thanks to effective risk-sharing mechanisms. As the continent grapples with disparities in monetary policy and economic conditions, the call to focus on strengthening trade and market access within the African Continental Free Trade Area (AfCFTA) is more critical than ever. By prioritizing productivity and innovation, Africa can position itself for sustainable growth, leveraging advancements such as Central Bank Digital Currencies (CBDCs) to enhance trade and economic resilience.

Virtual Insights from the panel

AGSEF 2024 saw an inspiring session led by Professor EVANS OSABUOHIEN , where he delved into the importance of public financial literacy in transitioning to a single currency. Reflecting on his academic journey and mentorship experiences, Professor Evans underscored the vital role political will and public acceptance play in overcoming obstacles in monetary union efforts. He emphasized the distinction between monetary unions and single currencies, highlighting examples from regions like Scandinavia. Professor Evans concluded by suggesting practical ways to address challenges, ensuring long-term economic benefits for member countries.

Highlights of critical microeconomic criteria necessary for a successful monetary union among African nations. Key among these is the inflation rate target, which must remain below five percent; however, many nations currently struggle to meet this benchmark, with inflation rates climbing into the double digits. Additionally, the budget deficit limit needs to stay under three percent of GDP, and public debt should not exceed sixty percent, both of which are significant challenges for numerous countries on the continent. Exchange rate stability and sufficient foreign reserves are also vital criteria that require urgent attention, particularly given the external influences such as political instability and varying economic structures that African nations face.

“If we don’t work towards meeting these five criteria, the journey to a successful monetary union might not be feasible, posing serious challenges for economic integration.” - Dr. Omowumi Monisola A.

African Continental Free Trade Agreement (AfCFTA) was highlighted as a stepping stone towards a unified currency for Africa. This initiative promises to significantly enhance the continent's ability to attract foreign investments by mitigating financial risks associated with exchange rates. By establishing a stable single currency, the complexities of navigating multiple currencies will be simplified, enabling businesses to operate more seamlessly across borders.

“Having a single currency will help us eliminate these challenges and boost Africa’s competitive edge on the global stage.” - Monsuru Sodeeq

To capitalize on this opportunity, policymakers must prioritize investment in critical infrastructure, such as transportation and energy, which will facilitate trade and enhance the ease of doing business.

AGSEF 2024 – The Catalyst for Change

AGSEF 2024 brought together a diverse group of thought leaders, policymakers, and business executives to discuss how Africa can overcome its trade barriers, particularly around monetary policy and currency. The forum was more than just another virtual conference; it was a call to action for every African stakeholder—government or business—to take steps toward creating a more cohesive and prosperous continent.

For those who could not attend this year's event, the key takeaway is clear: the future of Africa’s trade lies in implementing policies and practices that reduce currency barriers, harmonize trade laws, and foster partnerships across borders. Let us move from conversation to action and continue the work AGSEF 2024 has ignited.

Watch the session recording here: https://www.youtube.com/watch?v=9k4YwuaVCtI