Africa nations are accelerating the use of local currencies for cross-border trade, aiming to slash costs and reduce dependence on the US dollar. The shift is being led by a fast-expanding payments platform known as the Pan-African Payments and Settlement System (PAPSS), but the move has drawn sharp warnings from US President Donald Trump.
PAPSS allows buyers and sellers in different African countries to transact directly in their respective currencies without converting to the dollar, a process that has long driven up the cost of trade on the continent.
Cost-cutting not politics, say advocates
‘Our goal, contrary to what people might think, is not de-dollarisation,’ said Mike Ogbalu, CEO of PAPSS. ‘If you look at African economies, you’ll find that they struggle with availability for third-party global currencies to settle transactions.’
African banks still rely heavily on costly correspondent banking networks to process international payments—even when both trading partners are African. This system, combined with infrastructure constraints, makes trade within Africa 50 percent more expensive than the global average, according to the UN Trade and Development agency.
PAPSS estimates that a $200 million trade transaction between two African countries costs up to 30 percent using the current banking framework. With local currency settlement, that cost could drop to just 1 percent. Ogbalu told Reuters that such savings could add up to $5bn a year in hard currency across the continent.
PAPSS gains ground across Africa
Since launching in January 2022 with just 10 banks, PAPSS has grown to include 150 commercial banks in 15 countries, including Kenya, Zambia, Malawi, and Tunisia. ‘We have also seen very significant growth in our transactions,’ said Ogbalu, though he declined to share detailed figures.
The initiative aligns with broader efforts by countries like China and Russia to reduce reliance on Western financial systems. But African advocates insist their push is purely about financial sustainability.
The International Finance Corporation (IFC), part of the World Bank Group, is also supporting the transition by issuing loans to African businesses in local currencies.
‘If they are not generating hard currency, a hard-currency loan imposes a burden that makes it difficult for them to succeed,’ said Ethiopis Tafara, IFC’s vice-president for Africa.
Trump threatens retaliation over dollar shift
Despite African claims of financial pragmatism, President Trump has taken a hard stance against any move that undermines the dollar’s global dominance. After BRICS countries, including South Africa and Egypt, floated the idea of launching a common currency, Trump responded with threats of 100 percent tariffs.
‘There is no chance that BRICS will replace the US Dollar in International Trade… and any Country that tries should say hello to Tariffs, and goodbye to America!’ he posted on Truth Social in January.
Daniel McDowell, a political economist at Syracuse University, told Reuters that regardless of intent, Africa’s payment reform efforts may still be viewed through a geopolitical lens. ‘The perception is likely to be that this is about geopolitics,’ he said.
G20 push and regional urgency
With South Africa currently holding the G20’s rotating presidency, Africa’s regional payment strategy has become a global talking point. At a G20 finance summit in Cape Town earlier this year, South African Reserve Bank governor Lesetja Kganyago said: ‘Some of the most expensive corridors for cross-border payments are actually found on the African continent.’
‘For us to function as a continent, it’s important that we start trading and settling in our own currencies,’ he added.
Another G20 meeting of finance ministers is scheduled for mid-July, where African leaders are expected to push for broader international support to advance regional payments reform.
Despite the Trump administration’s pressure, the message from African capitals is clear: the cost of relying on the dollar is too high—and the time for alternatives is now.
Credit: Africa Briefing
