African states will be able to trade in their local currencies for intra-Africa trade under the African Continental Free Trade Area agreement (AfCFTA), an official said on Thursday.
Wamkele Mene, secretary-general of the AfCFTA Secretariat told journalists in Nairobi that the trading bloc is working with the African Export and Import Bank (Afreximbank) ) to establish a payment and settlement platform to eliminate the need for currency convertibility.
“When the platform is fully operational, African companies will be able to transact with their counterparties in other Africa countries in their local currencies,” Mene said.
Trading under AfCFTA commenced on Jan. 1, 2021, and it aims at creating the largest free trade area in the world in terms of the number of participating countries with a combined population of 1.3 billion.
Mene noted that the payment and settlement platform is currently being piloted amongst six African countries and will be rolled out across the continent by the end of 2021.
“The aim is to deal with the administrative burden cost of converting local currencies,” Mene added.
According to the AfCFTA Secretariat, there are 42 currencies in the continent and this remains a constraint to intra-Africa trade due to the need to use international currencies for trade.
Mene observed that so far 36 state parties have deposited the instruments of ratification meaning that they have expressed willingness to be legally bound by the rules of AfCFTA.
“They have also committed to opening up their markets to other African countries and establishing a level playing field by treating imports from the continent as their own products,” he added.