Africa’s financial landscape is experiencing a quiet revolution as countries across the continent roll out local currency payment systems that bypass the U.S. dollar. Spurred by soaring transaction costs, currency risks and shifting geopolitical currents, African leaders and regional institutions have embraced initiatives aimed at boosting intra-continental trade and preserving monetary sovereignty. From the Pan‑African Payments and Settlements System (PAPSS) to national card schemes and mobile banking corridors, a mosaic of innovative platforms is reshaping how money moves across Africa—and why the dollar may soon play a far smaller role in African commerce.

  Building the Pan‑African Settlement Backbone

  At the heart of Africa’s de‑dollarization push lies PAPSS, launched in early 2022 by Afreximbank under the African Continental Free Trade Area (AfCFTA) framework. This real‑time net‑settlement network allows businesses in one country to transact directly in local currencies with counterparts elsewhere on the continent—eliminating unnecessary conversions through the dollar or euro. By consolidating bilateral trade flows into a single net position, PAPSS slashes cross‑border transaction fees from as much as 30 percent to around 1 percent of deal value.

  Initially adopted by ten central banks in West Africa, PAPSS has rapidly expanded to cover 15 countries and over 150 commercial banks, including early adopters such as Nigeria, Kenya, Zambia and Tunisia. The system’s forthcoming “Africa Currency Marketplace” will further deepen currency liquidity by matching buy‑sell orders across different local units, enabling, for example, a Kenyan exporter to pay in naira while a Nigerian importer settles in shillings—without a single dollar touching the ledger. Project leaders estimate that scaling PAPSS to all AfCFTA members could save African economies up to $5 billion annually in hard‑currency outflows.

  Beyond cost savings, PAPSS strengthens payment resilience by reducing reliance on correspondent banking ties in Europe or North America—relationships that have been thinning due to post‑financial‑crisis regulation and commercial retrenchment. African central banks now collaborate directly, pooling foreign reserves and enhancing monetary cooperation. As intra‑African commerce grows under AfCFTA, PAPSS is poised to become the continent’s financial infrastructure backbone, supporting not only goods trade but also remittances, payrolls and securities settlement in home currencies.

  National Schemes and Tech Innovations

  Complementing this regional engine, individual countries have rolled out domestic payment schemes and fintech corridors that leapfrog traditional dollar‑centered systems. Nigeria’s AfriGo Pay, launched in January 2023 by the Central Bank of Nigeria, offers a domestic debit, credit and virtual card network that competes with global brands. By routing transactions through a locally owned switch, AfriGo improves speed, cuts processing fees and channels transaction data back into Nigeria’s financial system—bolstering data security and regulatory oversight.

  In Eastern Africa, discussions are underway to adapt India’s Unified Payments Interface (UPI) model for nations like Namibia and Zimbabwe. UPI‑inspired systems enable instant peer‑to‑peer and merchant‑to‑merchant transfers via smartphone apps, with interoperability across neighboring markets. Similar mobile‑money innovations, notably Kenya’s M‑Pesa corridor partnerships with Tanzania and Rwanda, illustrate the appeal of low‑cost, local‑currency remittances for individuals and small businesses.

  Blockchain experiments are also gaining traction as a way to settle cross‑border transfers without dollar-layer intermediaries. Ghana’s nascent digital‑currency pilot explores a tokenized cedi for wholesale settlements, while South African fintech startups are exploring distributed‑ledger platforms for trade finance in rand and pula. These prototypes promise instant settlement, audit trails and programmability—critical features as African trade networks expand under AfCFTA ambitions.

  Broader Impacts on Trade and Sovereignty

  The economic and strategic rationale for non‑dollar systems extends beyond lower fees. African businesses have long struggled with currency mismatches: exporting goods in cedis or naira but needing dollars to settle payments, exposing them to exchange‑rate shocks and liquidity crunches. Local‑currency platforms mitigate that risk, enabling firms to hold receivables in their home currencies and plan investment without speculative hedging costs.

  Regional political dynamics also play a role. While some global powers view de‑dollarization through a geopolitical lens, many African policymakers emphasize that their goal is pragmatic efficiency rather than antagonism toward the U.S. currency. Indeed, dollar‑pegged reserves remain crucial for external debt service and foreign investment. Yet by diversifying payment corridors, African nations gain greater autonomy to manage monetary policy and respond to external shocks—be they U.S. interest‑rate shifts, sanctions or global supply‑chain disruptions.

  Multilateral institutions have stepped in to underpin these efforts. The International Finance Corporation now offers local‑currency loans to African enterprises, reducing the burden of dollar‑denominated debt. Meanwhile, the G20 under South Africa’s 2025 presidency spotlighted regional payment integration, calling for technical assistance, legal harmonization and regulatory alignment to support systems like PAPSS. African central banks are also forging memorandums of understanding with counterparts in China, India and the Gulf to facilitate currency swaps and liquidity backstops that buffer local systems against volatility.

  Africa’s future trade dynamism depends on shedding the expensive, fragile dollar loop in favor of resilient, local‑currency rails. From the consolidated net‑settlement engine of PAPSS to national card schemes and digital‑wallet tie‑ups, African innovators and policymakers are crafting a de‑dollarized payments mosaic tailored to the continent’s unique economic tapestry. As these platforms mature and interlock, they promise not only to cut costs and tame currency risk, but also to deepen regional commerce, bolster financial sovereignty and chart a more inclusive path for Africa’s integration into the global economy.

  (Source:www.reuters.com)