(Ecofin Agency) - The idea of breaking free from the U.S. dollar is not new in Africa, but it has gained momentum in recent years. In a context marked by high volatility in local currencies, challenges in accessing financing in strong currencies, and persistent dependence on dollar-denominated imports, the issue deserves a deeper look. While moving away from the dollar is not simple, alternatives have been emerging across the continent in recent years.

The U.S. dollar has long been the backbone of global trade, shaping economies far and wide. But in Africa, its dominance has become a double-edged sword—a symbol of dependence and economic vulnerability.

Across the continent, the dollar rules. Nearly all vital imports—oil, wheat, and medicine—are priced and paid for in dollars. International loans are issued in dollars, trade between African countries is settled in dollars, and even the price of fuel depends on the dollar’s value. The dollar accounted for 57.4% of global foreign exchange reserves in Q3 2024, according to the IMF, and 88% of global currency exchanges involve the dollar, per the Bank for International Settlements. For Africa, the dollar’s supremacy sets the cost of essential goods, leaving economies at its mercy.

The cost of this dependence is high—very high. Every interest rate hike by the U.S. Federal Reserve ripples through African economies, shaking their foundations. Every fluctuation of the dollar puts significant pressure on public debt. In sub-Saharan Africa, around 40% of public debt is external, and over 60% of that is denominated in dollars, according to the IMF. This dependence magnifies the impact of dollar volatility on African economies, making them more fragile.

Nigeria’s struggles illustrate this issue. In 2023, the country spent billions trying to stabilize its currency, the naira, only to let it drop by 40%. In Ghana, the cedi lost nearly 30% of its value that same year, triggering a debt crisis. In Egypt, the depreciation of the pound against the dollar caused inflation to surge above 30%. Meanwhile, Kenya spent nearly 60% of its tax revenue on debt payments in 2022-2023, a burden made worse by the strong dollar and a weakening shilling.

Many are now questioning Africa’s heavy reliance on the dollar. Is it time for a change? Could the continent chart a new path toward economic independence?

Global disruptions have added urgency to these questions. The COVID-19 pandemic, the Russia-Ukraine conflict, trade wars with China, and U.S. sanctions on rivals have all fueled efforts to “de-dollarize” the global economy. While the dollar still dominates, its share of global foreign exchange reserves has declined from over 70% in the early 2000s to 57.4% in 2024. Central banks are diversifying their reserves, adding euros, yen, Chinese yuan, and even gold to reduce their reliance on the dollar.

African Countries Look for Alternatives

Some African nations are already acting. China, Africa’s largest trading partner, is leading efforts to promote the use of its currency, the yuan. In 2023, trade between that country and Africa reached $282 billion and continued to grow, hitting $167 billion in H1 2024. Countries like Egypt, South Africa, Nigeria, and Mauritius now pay for some Chinese imports in local currencies or yuan instead of dollars.

Nigeria has been at the forefront of this shift. In 2018, it signed a currency swap agreement with China, allowing trade in naira and yuan without converting to dollars. This $2.4 billion arrangement eased pressure on Nigeria’s foreign exchange reserves. In December 2024, Nigeria renewed the agreement for another three years.

Zambia has gone further. In 2023, it decided to use only the yuan for its trade with China. This move aimed to cut currency conversion costs and reduce the dollar’s influence on Zambia’s fragile economy.

Other partners, like the UAE, are also stepping in. Egypt signed a $1.36 billion currency swap with Abu Dhabi in 2023 to stabilize the pound and secure vital imports. Ethiopia followed with a similar deal in 2024.

These initiatives are small but significant steps toward reducing the dollar’s grip on African economies.

Regional Solutions for Independence

Beyond these bilateral efforts, Africa is also exploring regional solutions. The Pan-African Payment and Settlement System (PAPSS), launched by Afreximbank, allows businesses to trade across African borders using local currencies instead of dollars. Together with the African Continental Free Trade Area (AfCFTA), PAPSS could transform intra-African trade, which currently accounts for just 17% of the continent’s commerce. However, widespread adoption remains a challenge, as Africa’s markets are still fragmented.

A New Chapter for Africa’s Economy

It is true that breaking free from the dollar will not happen overnight. Many African currencies are tied to the dollar, and any shift will require major reforms—stabilizing local currencies, diversifying trade partnerships, and strengthening financial systems.

The dollar’s dominance remains entrenched, with 45% of Africa’s cross-border payments flowing through the SWIFT system, which is heavily reliant on dollar transactions. Yet, the global economic landscape is changing, and Africa has a chance to reshape its future.

This is not just about replacing the dollar with another dominant currency like the yuan. True independence means prioritizing African solutions—strengthening local currencies, building regional financial networks, and creating an economic system that works for the continent.

For now, the dollar still reigns. But no empire lasts forever. Africa’s next chapter could be about building its own foundations—strong, stable, and uniquely its own.

This article was initially published in French by Fiacre E. Kakpo

Edited in English by Firmine AIZAN