AU to establish African Central Bank by 2045

The plan to establish the African Central Bank (ACB) by the African Union will likely come to fruition by 2045.

African Union building

Ms Naglaa Nozahie representing the Association of African Central
Banks (AACB), said this while presenting the progress report on the
convergence of criteria for the ACB to the African Union on Thursday.

The briefing was part of proceedings at the third session of the
Specialised Technical Committee of the African Union (AU) on Finance,
Monetary Affairs, Economic Planning and Integration, holding in Yaounde,
Cameroon.

The meeting, which was organised in collaboration with the African
Capacity Building Foundation, had as its theme: “Public Policies for
Productive Transformation in Africa’’.

Nozahie, who is also a Special Advisor to the Governor, Central Bank
of Egypt, said the purpose of ACB was “to build a common monetary policy
and single African currency as a way to accelerate economic integration
on the continent’’.

She said the AACB held several meetings from 2002 to 2017 and came up
with the proposed macroeconomic criteria that must be met by each
member state before the African Central Bank could be established.

She said inflation must be three per cent or less by 2038, overall
budget deficit must also be less than or equal to three per cent by
2033.

Similarly, she said the ratio of central bank financing to the
government must be zero by 2038 and that each country must have foreign
reserves to cover at least six months of importation by 2038.

“In addition, the ratio of public debt to GDP must be less than 65
per cent while the ratio of total tax revenue to GDP must be more than
20 per cent.

“The ratio of government capital investment to tax revenue must be greater than 30 per cent,’’ she said.

Nozahie said experts, who worked on the convergence criteria, also
agreed that member countries must maintain the stability of the nominal
exchange rate at plus or minus 10 per cent.

She further said that analysis of member countries’ performance
showed that only 18 countries, out of 52, currently met all the primary
criteria for macroeconomic convergence.

It would be recalled that the AU Assembly in January 2005, which held
in Abuja, outlined decisions for the establishment of some African
financial institutions to improve intra-African trade.

Part of the decisions was that the African Central Bank should be
located in Nigeria, the African Investment Bank in Libya, and the
African Monetary Fund in Cameroon.

When it is fully implemented, the ACB will be the sole issuer of the
African Single Currency and would become the banker of the African
Government and Africa’s private and public banking institutions.

The ACB will regulate and supervise the African banking industry and
will set the official interest and exchange rates, in conjunction with
the African Government’s administration.