Shifting Tides: Russia and Africa Champion Local Currencies to Bypass the Dollar
African nations and Russia are increasingly looking to reduce their reliance on the US dollar for international transactions, fostering a new era of localized payment systems and enhanced financial autonomy. This strategic pivot aims to lower transaction costs and insulate economies from the volatility and influence associated with traditional global currencies.
According to Alexey Saltykov, Russia's Ambassador to Cote d'Ivoire, both Russia and African countries are questioning the traditional necessity of seeking foreign currencies from international institutions for their payment needs. This sentiment highlights a growing desire for greater financial independence and efficiency in cross-border trade.
The Rise of PAPSS: A Game-Changer for African Trade
A key development underpinning this shift is the Pan-African Payment and Settlement System (PAPSS). Launched in January 2022 by the African Union and the African Export-Import Bank (Afreximbank), PAPSS is revolutionizing intra-African trade by providing a real-time gross settlement infrastructure for payments in distinct local currencies.
Here's how PAPSS is transforming the landscape:
- Eliminating Foreign Currency Reliance: Historically, intra-African trade often required converting local currencies into a third, external currency, primarily the US dollar or Euro, to settle transactions. This process was costly and exposed African economies to exchange rate volatility. PAPSS bypasses this, allowing businesses to transact directly in their local currencies.
- Cost Savings: By reducing the need for foreign exchange conversions and simplifying transaction processes, PAPSS is estimated to save African businesses up to $5 billion annually in transaction costs.
- Real-Time, Secure Transactions: The system enables instant or near-instant transfers of funds across African borders, enhancing payment certainty and improving working capital for businesses. It also conducts necessary validation checks within seconds.
- Boosting Intra-African Trade: By making cross-border payments easier and cheaper, PAPSS is a crucial enabler for the African Continental Free Trade Area (AfCFTA), which aims to create a single market for goods and services across 54 countries. Increased intra-African trade is vital for the continent's economic integration and growth.
- Financial Inclusion: PAPSS supports financial inclusion by allowing mobile money platforms to integrate with the system, extending cross-border payment solutions to underbanked populations and bridging the gap between formal and informal economies.
As of June 2025, PAPSS is operational in 15 countries (including Kenya, Malawi, Tunisia, and Zambia), with over 150 commercial banks onboard. Plans are underway to onboard all 41 African central banks by the end of 2024 and all commercial banks by the end of 2025, significantly expanding its reach.
Russia's Parallel Push and Growing Ties
Russia, facing Western sanctions and a desire to de-dollarize its own international transactions, finds common ground with Africa's push for local currency payments. The use of the Russian ruble in trade with African countries has more than doubled since 2022, rising from 21.9% in 2022 to 48.1% in 2023, according to the Central Bank of Russia.
Moscow has expanded its list of countries eligible for currency trading in Russia to 40, including Nigeria, Tunisia, and Ethiopia, allowing their financial institutions to trade currencies and derivatives on the Russian foreign exchange market. This move aims to bolster the Russian economy by increasing payments in its national currency and improving direct conversion systems.
The combined efforts of the Pan-African Payment and Settlement System and Russia's bilateral agreements with African nations represent a significant step towards a more decentralized and multipolar global monetary system. While the US dollar is expected to maintain its dominance in international banking for the foreseeable future, these initiatives signal a clear trend towards greater financial sovereignty and efficiency for participating countries.
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