How is the dollar part of the trade between Djibouti and Kenya?

circumvent the dollar. And in early June, Andrey Kostin, the chief executive of Russia’s second-largest bank, said that the yuan could end up dethroning the dollar as China appears to be on the path of removing its strict currency restrictions.

Altruism, fragmentation of the global economy and the weaponisation of the US dollar aside, advocates for a single currency in Africa argue that it would promote greater economic integration among African nations and enhance the already ongoing process of transforming the continent’s segmented national markets into an integrated Africa-wide market.

As the African Continental Free Trade has driven historic growth, but dependence on a few key commodities has resulted in market uncertainty surrounding many of the continent's currencies. Africa remains an important producer of oil and natural gas, accounting for a significant portion of global production – and a single African currency could address the region's monetary challenges with respect to oil, gas and minerals, including currency conversion difficulties, which could positively impact revenues.

The importance of a single currency is emphasised by the African Union’s consideration for the entire continent, as it aligns with the objectives of the AfCFTA, and the eventual realisation of the AMU.

A unified currency would enable the implementation of a coordinated monetary policy across Africa, allowing for more effective management of inflation, interest rates, and exchange rates, which could contribute to macroeconomic stability, price stability, and fiscal discipline, fostering investor confidence and economic stability in the region. However, implementing a mechanism for gradual single currency integration requires energy, patience, and strong political leadership, despite potential doubts and setbacks.

One of the primary challenges to adopting a single currency in Africa is the significant economic diversity among African countries. Disparities in economic development, inflation rates, fiscal policies, and levels of economic integration make it difficult to establish a common monetary policy that suits the needs of all nations. Harmonising diverse economies could lead to economic imbalances and potential conflicts among member countries.

Critics argue that adopting a single currency would result in African countries relinquishing their control over monetary policy to a central authority. This could limit countries' ability to respond to domestic economic challenges and tailor monetary policies to their specific needs. The loss of flexibility in managing fiscal and monetary policy could hinder countries' ability to address economic downturns or imbalances.

Establishing a single currency requires strong regional institutions, including central banks, regulatory bodies, and mechanisms for fiscal coordination. Africa's institutional capacity varies across countries and building the necessary infrastructure and institutions could be a complex and time-consuming process. Implementing a single currency prematurely without robust institutions could lead to inefficiencies, governance issues, and potential economic crises.

Most importantly, implementing a single currency requires strong political will and consensus among African nations. There may be concerns over giving up national sovereignty, as a shared currency would involve coordinating economic policies and decisions with other member states. Political challenges, divergent national interests, and concerns over decision-making authority could hinder progress towards a single currency.

The debate over a single currency for Africa involves weighing the potential benefits of enhanced regional integration, increased trade, and economic stability against the challenges of economic diversity, loss of monetary autonomy, institutional capacity, and political complexities. It is crucial to carefully consider the readiness of African economies, establish strong regional institutions, and ensure broad consensus among member countries before embarking on such a significant undertaking.