Abstract

The desire for the African Monetary Union and the creation of a unified currency for the African continent erupted after the monetary integration of Europe. This proposed African common currency for Africa, which would be known as ‘afro’ is expected to be effective by 2028. The strategy for African monetary integration is based on progressive economic and monetary integration of African economic communities: the East African Community (EAC), the Southern African Development Community (SADC) and the Economic Community of the West African States (ECOWAS). These are the ‘building blocks of Africa’. Evidence generated from the analyses of the formation of the European Monetary Union (EMU) prompted conclusions that there were major defects in its establishment as exposed by the Eurozone crisis. Some of the optimum currency area (OCA) related design flaws of the Eurozone as identified in this paper are: (i) the absence of effective economic governance mechanism; (ii) the retention of banking supervision and resolution at national levels; (iii) the lack of financial back-stops and crisis resolution mechanisms at the union level; and (iv) defects in the design of the Eurozone's common central bank. Clearly, the Eurozone crisis has obviously revealed that banking union and integrated financial market, fiscal union and integrated fiscal framework and political union are all required in a monetary union for completeness and sustainability. Unfortunately, these are issues not addressed by the OCA theory. This paper consequently discusses these flaws and highlights banking union, fiscal union and political union as imperatives for complete and sustainable monetary integration in Africa. These are from the viewpoints in various debates on the sustainability and completeness of the EMU as well as various revealed faults in the design of Eurozone and the defects inherent in the original optimum currency area (OCA) theory and its application to monetary integration.