Is de-dollarization getting momentum in Africa?
The idea of a payment platform that would enable African countries to trade with each other using their own currencies is getting momentum, as the system has recently begun operating commercially with nine nations joining so far, according to Afreximbank President Benedict Oramah.
Pan-African Payment and Settlement System (PAPSS), which is funded by the
African Export-Import Bank (Afreximbank), expects to have 15 to 20 countries on
board by the end of the year, Oramah said in an interview before the bank’s
annual meetings in Ghana’s capital.
PAPSS system is currently using dollar exchange rates, but Oramah said they are
working with central banks to develop a mechanism that would allow the 42
currencies in Africa to be exchanged among themselves.
are trying to make intra-African payments more local,” he said. Most of the
trade within Africa is done through converting to the US dollar, which creates
barriers and costs for intra-regional trade.
along with the African Continental Free Trade Agreement and other initiatives,
aims to boost internal trade by removing these obstacles, including the need
for intermediaries such as the greenback.
African leaders have increasingly advocated for trading in currencies other
than the US dollar, which has been the dominant global currency for over 75
years. Many countries, including in Africa, want to trade in local currencies
to reduce expenses, avoid sanctions and reshape the global financial system.
instance, the South African High Commissioner to India has recently criticized
the “domination” of the US dollar in the world economy. Also, the President of
Kenya, William Ruto, has repeatedly urged African leaders to stop using the US
dollar for trade within Africa, and to support the pan-African payment and
settlement system, which was launched in 2022.
Using the dollar has some benefits, such as the stability and
credibility of a strong, internationally recognized currency, but it also has
some drawbacks, such as the scarcity of the dollar in many African countries,
which leads to artificial inflation of the value of the currency across the
continent, making business more expensive. The devaluation of the currency also
increases the costs of important imports like fuel and raw materials, which
puts more pressure on the economies.
experts say that if African countries used their own currencies instead of the
dollar, they would achieve more regional integration. Using regional currencies
could improve economic ties and increase trade within Africa and reduce
reliance on foreign imports.
can also give more control over economic policies and protect African economies
from external shocks and fluctuations in the global financial system, which can
make economies more stable and resilient. However, this requires strong
fundamentals and comprehensive reforms.
de-dollarize successfully, African countries need to have solid macroeconomic
fundamentals, political stability, and effective governance. African countries
that want to de-dollarize must implement comprehensive reforms, including
strengthening institutions, improving fiscal management, and promoting
However, given the fact that the de-dollarization initiative is getting momentum in Africa, Asia and some other parts of the globe, we would witness significant implications for the United States’ long-term influence in the financial, trade and economic spheres.