the establishment of the African Central Bank PRESENTED BY: DR. RENE N’GUETTIA KOUASSI DIRECTOR ECONOMIC AFFAIRS-AFRICAN UNION COMMISSION

OUTLINE I. BACKGROUND TO THE ESTABLISHMENT OF THE AFRICAN CENTRAL BANK (ACB) II. THE AUC-AACB JOINT STRATEGY

Background to the Establishment of the African Central Bank (ACB) 1991 : The Abuja Treaty (Art. 5) : “The establishment of a single African Central Bank and the creation of a single African Currency” 2000: The Constitutive Act of the African Union (Art. 19):“The Union shall have the following financial institutions…The African Central Bank” 2005:AU Assembly Decision on location of AU Institutes (Assembly/AU/Dec.64): “African Central Bank - Western Region” designated to Nigeria.

Background to the Establishment of the African Central Bank (ACB) 2009:AU Commission signs MoU with the Nigerian Government to host the ACB. 2013: AUC-AACB Joint Strategy Report on the Establishment of the ACB is validated by AUC-AACB Joint Committee 2015: AUC-AACB Joint Strategy Report is adopted by the AACB Assembly of Governors.

The AUC-AACB Joint Strategy ( Introduction)  Takes into account Political Economy Context, Objectives of the African Union, various African Union legal frameworks and attendant initiatives, and the different stages of integration attained by the Regional Economic Communities.  Discusses stages and approaches; preconditions for successful economic and monetary union, and the net benefits of economic and monetary union; it also highlights lessons learned from the Euro zone debt crisis and monetary unions worldwide.  Provides strategies and a roadmap with clear tasks and timelines leading to the establishment of the African Monetary Union, The African Central Bank and the African Single Currency, while highlighting the role of the African Monetary Institute (AMI).

The AUC-AACB Joint Strategy ( 5 stages for establishing the ACB) Mar– Dec, 2014 :  Creation of the African Monetary Institution (AMI) – 2017 :  Effective FTAs at REC levels and preparations for effective Customs Unions;  Strengthening Macroeconomic convergence and Financial Integration;  Tripartite Free Trade Area (TFTA), PIDA (phase I-II), and resolution of overlapping REC membership – 2022 :  Effective RECs Customs Union  Deepening of Macroeconomic Convergence and Financial Integration  PIDA (phase II continued) and establishment of Continental Free Trade Area (CFTA)

The AUC-AACB Joint Strategy ( 5 stages for establishing the ACB) :  Effective REC Common Markets and establishment of REC Central Banks and Fiscal Banking Unions by  Further strengthening of macroeconomic convergence and financial integration (payments and settlement systems, sub-regional and regional stock exchanges,).  PIDA (phase III) and establishment of Continental Customs Union – 2034:  Establishment of an African Common Market and Economic and Monetary Union, including Continental Fiscal and Banking Unions culminating in the African Central Bank and Single Currency.

The AUC-AACB Joint Strategy (Recommendations)  Political Commitment: Creation of Ministries of Integration and REC Affairs in all African Countries.  Governance and Implementation Strategy:  AU Conference of African Ministers of Economy and Finance (STC on Finance, Monetary Affairs, Economic Planning and Integration) to monitor the process.  The African Monetary Institute (AMI) should be set up to undertake the preparatory work and then report through Joint Committee to the STC, the Council of Ministers and Heads of State and Government.  Voluntary Memberships to allow countries to join when they are ready to meet criteria.  Overlapping memberships in RECs needs to be resolved so countries identify with an individual REC as their vehicle for monetary integration.

The AUC-AACB Joint Strategy (Recommendations)  Integration stages and approach that focuses on eliminating obstacles and creating convergence at REC level before aiming at continental level; harmonize the AACB African Monetary Cooperation Programme (AMCP) timeline of 2021 with the Abuja Treaty timeline of  Macroeconomic convergence should be given due attention:  Aligning REC macroeconomic convergence to the AMCP framework;  Ensuring REC Exchange Rate Mechanisms adhere to universal rules;  Addressing key challenges of African Central Banks in monetary policy management;  Rationalizing public expenditure among member states.  Development and integration of financial markets

The AUC-AACB Joint Strategy (Recommendations)  Strengthening policies for economic diversification to reduce commodity price volatility.  Surveillance and enforcement mechanism and regulatory framework with binding commitments and sanctions.  Strengthening of the development of physical infrastructure.  Statistical harmonisation to support economic and monetary integration.  Accelerating the trade integration process and the mobility of factors of production, including effective financial compensation mechanisms for customs revenue loss.  Transitional institutional arrangements such as the African Monetary Institute (AMI).  Communication Strategy and Sensitization Programme.

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