Africa’s Currency Crisis and the Need for Change

Guys, We Can’t Keep Building at a Loss: Africa’s Currency Crisis and the Need for Change. Have you ever wondered why your hard-earned money loses value overnight? Why a farmer in Kenya must first convert shillings to dollars just to buy cocoa from Ghana? Why an African airline must secure USD to fuel a plane flying between Lagos and Addis Ababa? The truth is, Africa is bleeding wealth; not because we lack resources, but because we trade within our own continent using foreign money.

Let’s talk about the real cost of this broken system.

• Everyday Costs for the Common African: Imagine you’re an entrepreneur in Rwanda, importing fabrics from Nigeria. You’re not just paying for the materials; you’re also paying hidden costs for currency conversion, sometimes as high as 10% of your transaction. That’s money that could have gone into expanding your business, creating jobs, or reinvesting in local markets.
• Central Banks Struggling to Keep Up: Ever noticed how quickly local currencies fluctuate? That’s because our central banks are forced to hold massive USD reserves just to stabilize their economies. Egypt and South Africa alone spend billions defending their currencies, yet they still remain vulnerable to external shocks.
• Africa is Paying Indirect Tax to the Global North: When Africa receives loans, grants, or trade investments, a chunk of it goes right back out when we trade in foreign currencies. It’s like pouring water into a leaking bucket; we build, we invest, yet we continue to lose.

So What’s the Solution?

It’s simple: Africa needs its own exchange currency, not as a replacement for national currencies, but as a medium for intra-African trade. If the African Development Bank (AfDB) can facilitate billions in infrastructure and economic growth, imagine what a dedicated AU-backed currency (AUC) could do.

The AUC (African Union Currency) would:

• Eliminate Conversion Fees: No more losing $5 billion annually just to change money for intra-African trade.
• Reduce Inflationary Pressures: African reserves should be held in Africa, not in USD or euros.
• Boost SME Competitiveness: With stable pricing across borders, small businesses could thrive without forex burdens.
• Strengthen Financial Institutions: Imagine AfDB, Afreximbank, and other AU financial bodies holding reserves in AUC, facilitating African trade without the need for external currency backing.
• Pay Expatriates and Foreign Contractors in AUC: Instead of African countries struggling to secure USD for salaries and international contracts, the AUC could become a legitimate settlement currency, strengthening its global standing.

What’s Holding Us Back?

Some say Africa isn’t ready. But was Europe “ready” when they introduced the euro? Didn’t BRICS nations create their own trading frameworks to reduce reliance on the dollar? Africa’s financial institutions are some of the most resilient in the world. The Pan-African Payment and Settlement System (PAPSS) already proves we can trade without the dollar. So what’s stopping us?

Let’s Talk About It

What do you think? Can Africa truly break free from the foreign currency trap? Should the AU take bold steps toward financial autonomy? Let’s hear your thoughts. Tag African financial leaders, policymakers, and industry experts, because if we don’t push this conversation forward, who will?

O . E

Sam Maimbo for AfDB President African Development Bank Group African Union African Export-Import Bank (Afreximbank) ECOWAS Commission