Africa currency marketplace to reduce trade reliance on US dollar

The Pan-African Payment and Settlement System (PAPSS) is piloting the Africa Currency Marketplace, a platform designed to facilitate cross-border trade using local currencies.

Backed by 15 central banks, PAPSS aims to launch the platform later this year to reduce dependence on the U.S. dollar in African trade.

The initiative comes amid a push for de-dollarisation in Africa, with leaders like Kenyan President William Ruto advocating for alternatives to the dollar in settling transactions.

PAPSS CEO Mike Ogbalu emphasised that the platform will enable direct currency exchanges between African nations, with fees determined by market forces.

“Our system will intelligently match them, and party A will get naira in Nigeria while party B will get birr in Ethiopia,” Ogbalu explained.

The Africa Currency Marketplace is expected to boost intra-African trade under the African Continental Free Trade Area (AfCFTA) by addressing challenges like forex shortages and high transaction costs.

Currently, many African businesses face difficulties repatriating funds due to reliance on foreign currencies.

For example, in 2023, Ethiopian Airlines and Dangote Cement executed a $100 million currency swap due to forex constraints.

PAPSS's real-time settlement framework eliminates the need for intermediary currencies like the U.S. dollar or euro, reducing transaction costs and exposure to exchange rate volatility.

The system consolidates payments between countries, settling only net balances to optimise liquidity for central banks.

Despite its potential benefits, some observers question whether PAPSS can effectively replace the dollar.

Critics warn that such initiatives may face resistance from global powers like the United States.

However, Ogbalu remains confident in PAPSS’s capacity to facilitate seamless currency swaps and enhance financial autonomy across Africa.

The platform builds on PAPSS's previous successes since its 2022 launch, including integration with 150 commercial banks and early adoption by countries like Kenya and Egypt.