[By Guancha Observer Network, Qi Qianting] "From the Eastleigh Market in Nairobi, Kenya, to the Alaba area in Lagos, Nigeria, a financial transformation is quietly unfolding across Africa's commercial hubs."
On May 4th, the South China Morning Post published an article titled "Why African Traders Are Turning Away From the Dollar and Towards the Renminbi." The article points out that amid rising geopolitical tensions, African traders are increasingly avoiding the use of the dollar and are instead opting for the renminbi, building an "informal renminbi payment network" to do business with the world's second-largest economy, China.
In Eastleigh, a commercial hub located northeast of Nairobi, the capital of Kenya, traders have established a folk model for paying for imported goods from China: traders pay in local currency, and logistics companies act as key agents, providing exchange services and responsible for paying the Chinese sellers in renminbi.
These logistics companies also facilitate the flow of goods from Chinese procurement centers such as Guangzhou and Yiwu, where many African traders purchase products for sale. Chinese sellers receive payments directly from the logistics companies and then ship the goods to Nairobi.
"I just need to confirm with the seller what I want to buy and then pay through an agent in Nairobi," said Anne Komonto, a trader in Eastleigh.
The commercial center Eastleigh, located northeast of Nairobi, the capital of Kenya Local media
The South China Morning Post noted that geopolitical tensions and the internationalization of the renminbi have driven the emergence of the informal renminbi payment model in Nairobi. This trend marks a broader shift in global trade, as more countries seek to use their own currencies under China's support.
In recent years, China has been actively promoting the role of the renminbi in cross-border transactions. Although the renminbi still accounts for a relatively small proportion of global trade compared to the dollar, it is unlikely to pose a substantive challenge to the dollar's hegemony in the short term. However, the international community is increasingly concerned about the risk of weaponized dollars and is showing growing interest in reducing dependence on them.
The report mentioned that recently, Kenya's Finance Minister John Mubadhi stated that the country has discussed the possibility of using renminbi rather than the dollar to denominate new funds from Chinese lenders.
In Nigeria, this informal trading practice is also common, especially in major commercial centers like Lagos' Alaba district.
Nigeria is China's second-largest export destination in Africa after South Africa, and also China's largest engineering contracting market, third-largest trading partner, and major investment destination in Africa. Data shows that in 2024, Nigeria's total imports of Chinese goods amounted to 137.4 billion yuan, while Nigeria's exports to China reached 21.7 billion yuan.
According to the website of the Ministry of Foreign Affairs, in April 2018, the People's Bank of China and the Central Bank of Nigeria signed a bilateral currency swap agreement between China and Nigeria (Nigeria) in Beijing. It was renewed for three years in June 2021.
According to the website of the People's Bank of China, in December 2024, the People's Bank of China and the Central Bank of Nigeria renewed the bilateral currency swap agreement. The scale of the swap is 15 billion yuan / 328 billion Nigerian naira, with a validity period of three years, which can be extended with mutual consent. The renewal of the bilateral currency swap agreement between China and Nigeria will help strengthen financial cooperation between the two countries, expand the use of local currencies between the two countries, and promote the facilitation of bilateral trade and investment.
Ovigwe Egwu, a policy analyst at Beijing-based consultancy Rinaxin International, said that the informal trade settlement model bypassing the dollar using the renminbi exists not only in Kenya or Nigeria but is likely to spread throughout Africa and other parts of the world.
"Economic feasibility and geopolitical foresight are driving the rise of such informal models," Egwu pointed out. "Given the deep and solid trade relationship with China, we will establish new informal systems to ensure smooth payments." He explained that both African and Chinese traders see signs of tension in Sino-American relations and the intention of the United States to disrupt China's trade with other countries.
Lauren Johnston, associate professor at the Center for China Studies at the University of Sydney and an expert on Sino-African relations, explained that the informal foreign exchange market is related to unusual global circumstances, in which China plays a huge role as an exporter.
Johnston said, "This has a huge impact on trade because this system can be used for instant payments and timely payments within the framework of exchange rate agreements." She added that it also reduces the volatility of some traditional currencies or risks associated with actual payments in trade. Moreover, due to traceability, it will promote payments based on local currencies.
According to reports by Nigeria's Vanguard newspaper, last month, Joseph Tegbe, director general of the Nigeria-China Strategic Partnership, stated that the country will sign an agreement with China regarding digital renminbi to allow Nigerians to directly exchange naira for renminbi. Tegbe said that it is expected that the agreement will help reduce Nigeria's reliance on the dollar.
Egwu said that given the escalating geopolitical tensions, the weaponization of the dollar, and transaction fees, countries outside the West are increasingly using their own currencies for trade. He said that the introduction of the digital renminbi between China and Nigeria introduces an innovative tool that "not only improves the efficiency of bilateral trade settlement," but also "provides additional protection for bilateral trade settlement against interference from third parties."
On April 20th, a survey released by the International Monetary Institute of Renmin University of China showed that amid questions about the safety and credibility of American assets, both domestic and foreign enterprises are increasingly enthusiastic about using the renminbi for international payment and settlement.
In 2024, the usage rate of cross-border trade settlement in renminbi continued to grow steadily International Monetary Institute report
According to the report, in the fourth quarter of 2024, over sixty percent (about 68%) of surveyed enterprises had cross-border trade settlement business in renminbi, and more than half (53%) of surveyed enterprises used renminbi for foreign exchange transactions. Besides the US dollar, about thirty percent of enterprises reported that the share of renminbi settlement exceeded 50%, and more than sixty percent of enterprises reported that the share of renminbi settlement exceeded 10%.
At the time of the release of the above report, the U.S. stock market remained volatile. Affected by President Trump's so-called "reciprocal tariff" policy, recently, there has been a panic selling of U.S. Treasury bonds, with the yield on 30-year Treasury bonds rising by 0.5 percentage points at one point. The ongoing tension in Sino-U.S. trade has exacerbated concerns about the "decoupling" of the two economies and the worsening of the global economy.
"The sharp increase in volatility in the U.S. Treasury market recently is a watershed event," said Yang Changjiang, a professor of finance at Fudan University. Unlike previous periods of turmoil, this time global capital did not flow into the United States. Professor Yang further pointed out: "We used to think that trade settlement was the main driver of renminbi internationalization, but now the focus has shifted to whether the renminbi can serve as a safe-haven asset. This is an opportunity we must seize."
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Original source: https://www.toutiao.com/article/7500613304688050688/
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