AfDB proposes currency backed by critical minerals

US and China are in a race for the critical minerals — such as cobalt and lithium

In an ambitious bid to transform Africa’s financial landscape, the African Development Bank (AfDB) has proposed a new, non-circulating currency system modelled on the historic gold standard. The proposed mechanism, known as the African Units of Account (AUA), would be backed by the continent’s vast reserves of critical minerals—including cobalt, copper, lithium, manganese, and rare earth elements—which are crucial for the global energy transition and electric vehicle production.

Despite possessing roughly 30 percent of the world’s critical mineral reserves, Africa attracts only a small share of global energy investments. The AfDB reports that while the world witnessed an 8 percent decline in overall foreign direct investment last year, Africa’s potential remains largely untapped, with just 3 percent of global energy investments and only $40bn directed toward green projects. A key challenge has been the continent’s volatile currency markets, which have hindered the flow of capital necessary to drive large-scale clean energy initiatives.

The AfDB’s innovative proposal suggests that African nations pool a pre-determined amount of their proven critical mineral reserves. This collective reserve would then underpin the AUA, allowing local currencies to be converted at an agreed exchange rate. ‘The idea borrows from the Gold Standard that once anchored global currency stability,’ the bank explained in a recent report, noting that a basket of critical commodities would likely hold its value better than any existing African currency.

The envisioned currency system is expected to deliver multiple benefits

The envisioned currency system is expected to deliver multiple benefits. By reducing the cost of capital for clean energy projects, the new mechanism could encourage cross-border financial cooperation and bolster Africa’s negotiating power in global resource markets. This, in turn, is seen as a pivotal strategy to help narrow the continent’s $400bn annual funding gap and to support the broader sustainable development agenda.

To meet the escalating demand for clean energy, Africa must double its annual green investments to approximately $200bn. The AfDB argues that the proposed AUA could play a key role in attracting this investment by creating a more stable, asset-backed financial environment. In practice, revenues from electricity sales in local currencies would be collected by a designated settlement agent who would then sell an equivalent amount of minerals to generate dollars—ensuring the repayment of loans tied to energy development projects.

By leveraging its abundant mineral resources, the AfDB aims not only to drive down financing costs but also to stimulate economic growth and long-term energy security across the continent. The bank’s proposal, first floated last year and now detailed for the first time, represents a bold step toward reshaping Africa’s investment climate and reinforcing its position in the global energy transition.

Credit: Africabriefing

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