President William Ruto’s Clarion Call:
When His Excellency, President William Ruto of Kenya, urged
Africans to jettison the US Dollar while conducting intra-continental trade, during his address on the floor of the Djiboutian parliament in June 2023, I felt a sense of “renewed optimism” in the possibility of Africa weaning itself from the vise-like grip of the relics of colonial legacies.
Legacies which include the “continued dollarisation” of the continent’s economy. He asked, “Traders from Djibouti selling to Kenya or traders from Kenya selling to Djibouti, we have to look for US dollars: how is the US dollar part of the trade between Djibouti and Kenya? Why?”. I initially visited this subject last year, in a piece
on the need for Africa to adopt a single currency, and collapse the continent’s economy into the proposed single African Monetary Union, to be administered by an African Central Bank, as soon as possible, if African Continental Free Trade Agreement [AfCFTA] is to realise its full aims and objectives. President Ruto’s sentiments speak to the pressing issue around establishing Africa as one large, robust trade bloc that must be accorded its due respect among the comity of trading nations in the world.
A CASE IN SUPPORT OF RUTO’S POSITION
Some argue that the value of the US Dollar is derived from the strong economic base of the United States of America. But on a more critical note, and in support of President Ruto’s position, I shudder to ask; how much of “Made-in-America” goods do people in Africa consume? I am talking about “fast-moving consumer goods (FMCG) and light household items. The answer is very close to “none”. As a matter of fact, the majority of goods in that category are usually brought in from China, and other Asian countries. Meanwhile, the majority of the goods coming out of the US are military hardware, which is the least of what Africans need to improve their standard of living. Yet, trade in Africa is not as dependent on the Chinese Yuan, as much as it is, on the US Dollar. The Nigerian economy, as I pound my keyboard, is at the mercy of the United States’ Dollar. Why? Because, almost every transaction in Nigeria is now [illegally] denominated in the US Dollars when the legal tender in the land is the Naira. A US Dollar now goes for as much as ₦1300, which is a loss of about 200% in the value of the Nigerian currency, between 2021 and 2023. A large section of the Nigerian business community now discusses business in terms of the Dollar, not Naira anymore – a complete “dollarisation of the economy”. This has severely hurt the local economy.
STATISTICS OF TRADE BETWEEN AFRICA AND THE US SPEAK VOLUMES.
“The African Business” recently reported
that; “Africa accounts for less than 2% of total US merchandise exports and imports”. It added that, “The overall value of the US exports to the continent fell from $32.9 billion in 2011 to $26.7 billion in 2021, while imports declined from $93 billion in 2011 to $37.6 billion, in 2021, according to the United States Census Bureau.”
So the statistics about the volume of trade between Africa and the US speak to reality, when juxtaposed with that of China. International Affairs journalist Robert Bociaga reported
that “Africa’s bilateral trade with China surged to a record high last year (2022), highlighting how Beijing’s commercial influence over the continent continues to dwarf that of the U.S.” He added that, “Rising commodity prices and Beijing’s push to promote imports from Africa pushed trade up by 11%, to $282 billion in 2022.” Additionally, “China’s exports to Africa were $164.49 billion, while imports reached $117.51 billion.” He also went further to state that, “Nigeria is now Africa’s largest importer from China, while South Africa is the biggest exporter, followed by Angola and the Democratic Republic of the Congo.”Despite all these, the African economy is not benchmarked against the Yuan. As a matter of fact, I looked around as I put this piece together, and I could not find an item, with an inscription of “made-in-the-USA”, yet whenever the dollar sneezes, economies across the continent of Africa catch a cold, due to over-dollarisation.
Recently, a report
emerged that the Ethiopian Airlines, and Dangote Cement, Ethiopia, had to swap about $100 million dollars in trapped funds in their respective countries of origin, due to a shortage of dollars in both Ethiopia and Nigeria.
USA and China trade war. US of America and chinese flags crashed containers on sky at sunset background. 3d illustration
TIMELINESS OF RUTO’S CALL
So the clamour by President Ruto, for the de-dollarisation of the African economy, could not be timelier than this, considering the fact that the African Continental Free Trade Agreement has taken off and is ready to go full swing. Identified obstacles are now being gradually eliminated or reduced. Rwanda just joined countries like The Gambia, Seychelles, and Benin Republic, to announce Visa-Free entry for all Africans, thus easing the movement of people, goods, and other factors of production across borders. The Pan-African Payment and Settlement System (PAPSS) has also been adopted and successfully implemented in some countries within the African Continental Free Trade Area (AfCFTA). The need for the continent to ditch the US Dollar and embrace a single African Monetary Union, like the European Union, is getting stronger by the day.
With the coming into being of PAPSS, and the inherent benefits, Africans in the nearest feature would not need to depend on any foreign currency to transact business among the people from different countries of the continent. Currently, only nine countries’ central Banks – Nigeria, Ghana, Liberia, Guinea, Sierra Leone, The Gambia, Djibouti, Zimbabwe, and Zambia, out of the 54 African countries billed to trade under the AfCFTA, according to a report, per The Cable, are part of the PAPSS Network. The system has been test-run and the level of success recorded is encouraging. The hope is that the remaining 45 join as soon as possible.
THE BURDEN OF FOREIGN DEBT ON AFRICAN COUNTRIES.
In one of my articles published some months ago on the DevDispatch, I emphasized the weight of the debt burden of African countries, as an obstacle to attaining economic independence. Beautiful as the de-dollarisation project sounds, the burden of national debts to US-controlled financial institutions in Bretton Woods, and dependence on aids/grants from the US Government, and Non-government Organisations (NGOs) might, however, make a mess of the clamour as the sovereignties of some countries in the continent exist, only, at the mercies of those creditor-institutions. Therefore, they may not be able to sustain the De-dollarisation campaign. Another factor is grants/aids. Many African countries are beneficiaries of aid from the US government, or US-based NGOs, who are development partners. They [those African countries], most often, use these aids or grants to augment their national budgets. Will they be able to carry on without the largesse from their Western benefactors, who are majorly the owners of the currency – the dollar? That brings us to another germane question; is President Ruto alone on the journey for the De-dollarisation of the continent’s economy? Only time will tell.
Be that as it may, for the AfCFTA to realize its aims and objectives of setting Africa on the path of shared socio-economic prosperity, the economy must run on an indigenous machinery of a home-grown medium of exchange, under the auspices of a single African Monetary Union that would de-emphasize the dollar as a medium of exchange on the continent. Alternatively, instruments like PAPSS should be deployed in place of dependence on foreign currency. The call by the Kenyan President, therefore, is a wake-up call to the remaining 45 AfCFTA signatories whose Central banks are yet to come aboard the PAPSS network, as it has demonstrated the capacity to eliminate barriers posed by currency conversion, to cross-border transactions, among African countries, and eliminate the region’s dependence on the US Dollars in intra-African trades.
Adebayo Abubakar is a Nigerian journalist. You can reach him via email: firstname.lastname@example.org
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