According to the1986 Pear’s Cyclopaedia, “Senegambia” was formed in 1982 as a union of Senegal and Gambia. The two countries appear to have separated again, but I don’t remember anything in the news about it. So when and why did they split?
I don’t have all the details, but a quick search turned up that in 1981 there was a coup in Gambia that was put down with Senegalese troops. After suppressing the revolters the two countries entered into a confederacy in 1982 ( with a Senegalese garrison remaining ). By 1989 however the Gambian unhappiness with the situation and some diplomatic quarrels came to a head. Consequently the confederation was dissolved and the Senegalese garrison withdrew.
- Tamerlane
From http://globaledge.msu.edu/ibrd/CountryIntro.asp?CountryID=127&RegionID=5
As far as I know, Senegambia was never more than a confederation - it was never a country in its own right, although the original plan appears to be that it would eventually become one.
The word is still sometimes used as a shorthand term for the two countries, though.
When in doubt, try the dictionary.
So it appears that Senegal wanted unification but Gambia did not, so the deal was broken.
The Confederal Document of Senegambia. – It is amazing what Google can find. 
They would have been joined at the hip if this deal had gone through. Interesting.
Yes, I did try a very quick look at Google, without finding anything. It’s often more interesting to hear what people on the boards have to say about a given topic, and it also gives people a chance to find out about things they hadn’t heard about. As you say, Derleth, that document is interesting. If I had done a full google search you wouldn’t have found out about it today, would you? Anyway, thanks for the answers everyone.