March 2 (Bloomberg) -- The African Union will sign a memorandum of understanding this month with Nigeria on the establishment of a continental central bank.

The institution will be based in the Nigerian capital, Abuja, African Union Commissioner for Economic Affairs Maxwell Mkwezalamba told reporters today in Nairobi, the Kenyan capital. As an intermediate step to the creation of the bank, the pan- African body will establish an African Monetary Institute within the next three years, he said at a meeting of African economists in the city.

“We have agreed to work with the Association of African Central Bank Governors to set up a joint technical committee to look into the preparation of a joint strategy,” Mkwezalamba said.

African economies plan to integrate in order to boost economic growth and development and reduce poverty. The continent has about 13 percent of the world’s population and accounts for only 1 percent of foreign direct investment, 1 percent of global domestic product and 2 percent of world trade, according to the African Union’s Web site.

The union will appoint a steering committee within a month to work on establishing the African Monetary Fund, which will be based in Cameroon.

The Addis-Ababa based African Union also expects the minimum of 15 countries to ratify a protocol establishing an African Investment Bank by December, Mkwezalamba said.

African heads of state approved the protocol during their last meeting in Addis Ababa last month, while the Union and Libya signed a memorandum of understanding last year under which the North African country will host the investment bank in its capital, Tripoli, Mkwezalamba said.

“The investment bank will be a clearing house facilitating African trade,” he said.

To contact the reporter on this story: Eric Ombok in Nairobi via Johannesburg at pmrichardson@bloomberg.net.

Last Updated: March 2, 2009 07:30 EST