‘The looming challenge to dollar dominance’

This is apropos two back-to-back letters to the Editor with the above headline carried by the newspaper on Tuesday and yesterday. It is increasingly clear that African nations are actively working to reduce their reliance on the U.S. dollar in trade and investment to enhance economic sovereignty and mitigate vulnerabilities associated with currency fluctuations.

A significant initiative in this direction is the Pan-African Payment and Settlement System (PAPSS), launched by the African Union, which facilitates cross-border trade using local currencies, eliminating the need for U.S. dollar conversions.

This system is projected to save the continent approximately $5 billion annually in currency conversion costs.

Additionally, countries like Nigeria and Tanzania have implemented policies to promote the use of their national currencies in international transactions. For instance, Tanzania has banned pricing in foreign currencies to strengthen the Tanzanian shilling’s role in trade.

Furthermore, the African Continental Free Trade Area (AfCFTA) agreement encourages member states to conduct trade in local currencies, fostering intra-African commerce and reducing dependence on external currencies.

ASEAN member states are actively reducing their reliance on US dollar by promoting the use of local currencies in trade and investment.

Initiatives include establishing Local Currency Settlement (LCS) frameworks among countries like Indonesia, Malaysia, and Thailand to facilitate direct currency exchanges without involving U.S. dollar.

Efforts are also underway to enhance regional payment systems, integrating digital platforms and standardizing QR code payments across member nations.

ASEAN finance ministers and central bank governors have expressed commitment to advancing local currency usage to strengthen financial resilience and reduce exposure to external economic shocks.

Copyright Business Recorder, 2024