Mo Ibrahim: Africa Loses $5bn in Currency Conversion Costs Yearly

Why It Matters

Reducing conversion costs could unlock billions in trade value and accelerate job creation under AfCFTA, while strengthening monetary sovereignty across the continent.

Key Takeaways

• Africa loses about $5 bn annually to currency conversion.
• Currency costs hinder AfCFTA’s goal to raise intra‑Africa trade to 53%.
• Pan‑African Payment and Settlement System (Papss) offers local‑currency settlements.
• Limited convertibility adds to non‑tariff barriers like customs and standards.
• Single African currency by 2028 appears unrealistic given current delays.

Pulse Analysis

Currency‑conversion fees are a largely invisible drag on African commerce, siphoning an estimated $5 billion each year from businesses that must route payments through multiple foreign currencies. This cost compounds the continent’s already heavy non‑tariff barriers—customs delays, divergent regulations, and border inefficiencies—making the African Continental Free Trade Area’s (AfCFTA) ambition to boost intra‑regional trade to 53% by 2035 harder to achieve. By inflating transaction costs, conversion fees erode profit margins and deter small‑ and medium‑sized enterprises from expanding across borders, limiting the potential $1 trillion manufacturing uplift and $470 billion income growth projected for the next decade.

The Pan‑African Payment and Settlement System (Papss), introduced by the African Union and Afreximbank in 2022, seeks to neutralize these frictions by allowing firms to settle in their own local currencies while the platform handles the conversion internally. By anchoring settlements to central banks rather than foreign intermediaries, Papss reduces reliance on the U.S. dollar, offers more transparent exchange rates, and improves monetary sovereignty for participating states. Early adoption shows faster payment cycles and lower fees, but scaling the system requires broader regulatory harmonisation and confidence in the platform’s governance.

Long‑term integration hinges on more than payment infrastructure; the continent’s roadmap still envisions a single African currency by 2028, a target now widely regarded as unrealistic given divergent fiscal policies and uneven macro‑economic convergence. Nonetheless, incremental steps—such as expanding Papss coverage, streamlining customs procedures, and aligning standards—can deliver immediate gains. Policymakers who prioritize these pragmatic reforms will not only cut the $5 billion conversion leak but also lay the groundwork for deeper financial integration and a more resilient, unified African market.