Africa to bypass USD, Euro in intra-Africa currency exchange launch
By Synthia Lateu
The African continent will soon cease using a third-party currency, such as the Dollar or Euro, in currency exchanges, thanks to the launch of a unified capital market known as the Africa Currency Marketplace.
Developed by the Pan-African Payments and Settlement System (PAPSS), it will allow parties to exchange local currencies directly without dependency on third parties, offering businesses new borrowing and investment opportunities across all 54 countries.
PAPSS, backed by 15 central banks on the continent, expects to complement its payments infrastructure, which is currently integrated with 150 commercial banks, according to the organization. The platform will also address the challenges of repatriating revenue in the region, particularly during times of violence or economic issues that cause dollar shortages in the market.
Mike Ogbalu, the CEO of PAPSS, told Reuters that the rates will be market-driven, and the system is able to do a matching based on the rates offered by the different participants in the ecosystem.
Impact on Liquidity and Currency Stability on the Continent
Africa’s foreign exchange markets are often shallow, and liquidity is limited. Across the continent, currencies are not convertible amongst each other, and obtaining other African currencies typically requires securing Dollars or Euros first.
Speaking to Africanews, Stan Zézé, the chairman and CEO of private rating agency Boomfield Investment, stated that the platform will greatly impact liquidity and currency stability in Africa:
“Now that an African country or an African businessman can trade among countries without going through a third party like the Euro and Dollars, it’s going to make it so much easier to improve the trade relationship between countries. The second thing is that through this platform, businessmen or women in Ghana will be able to borrow in Nigeria, will be able to borrow in Cameroon, Côte d’Ivoire, and so forth”.
He added that it is a first step toward establishing a single currency on the continent.
However, he highlighted the challenges of connectivity and electricity as potential issues in the system’s implementation. Nevertheless, he notes that these challenges can be overcome, as energy and digitization have become priorities for countries on the continent because they believe that this is what fosters development.
