China dominates the global rare-earth market – roughly 70% of mining, 85–90% of refining and magnet production. Neodymium (Nd) and praseodymium (Pr) are light rare earths used in NdFeB permanent magnets, while dysprosium (Dy) and terbium (Tb) are heavy rare earths added to boost high-temperature performance. These magnets are critical for most electric-vehicle (EV) motors. In April 2025, China imposed new export licensing requirements on seven medium/heavy REEs (including Dy, Tb) and related magnets, and by October 2025 it required licenses for any magnet or component using Chinese rare earth inputs. (China did not restrict light REEs like Nd/Pr in these moves.) These curbs – part of a broader trade spat – have stalled shipments, drained inventories and sent shockwaves through global EV supply chains.

Export-Control Timeline

In late 2023, China began tightening REE controls (e.g. banning export of extraction/separation technology). On April 4, 2025 Beijing announced non-automatic licensing for seven REEs (Sm, Gd, Tb, Dy, Lu, Sc, Y) and permanent magnets used in automotive, energy, and defense sectors. The curbs effectively covered key magnet ingredients (Dy, Tb) while leaving Nd/Pr (light REEs) unconstrained. Global automakers immediately scrambled – a May 2025 letter from GM, Toyota, VW, Hyundai and others warned that without these materials “it would only be a matter of time” before U.S. car factories halted. In response to the U.S.–China trade talks in mid-2025, China temporarily granted six-month export licenses to rare-earth magnet suppliers for the top U.S. automakers. Then on Oct 9, 2025 China expanded controls (Announcement 61) to require licenses for any foreign-made magnet or component containing Chinese-sourced rare earths or made with Chinese processing technology. This “major upgrade” means even minuscule Chinese content can block exports without approval, tightening China’s grip on high-performance magnets.

Magnet Manufacturing

Nearly all high-end permanent magnets are made in China. China’s share of sintered NdFeB magnet output has risen from 50% two decades ago to ~94% today. The April controls had an immediate impact: Chinese rare-earth magnet exports fell by roughly half in April 2025 as the new licensing process caused delays. Global magnet suppliers and automakers have been forced into “hand-to-mouth” operations. Ford CEO Jim Farley reported that Ford struggled with magnet supplies and even paused production, saying “we have had to shut down factories… it’s hand-to-mouth right now.” The magnet bottleneck was acute: Ford idled its Explorer SUV line for a week in May 2025 due to the rare-earth shortage, and Suzuki Motor suspended assembly of its Swift model as Chinese curbs bit.

Rare-earth magnets (NdFeB and SmCo types) use Nd/Pr (light RE) and Dy/Tb (heavy RE). China’s 2025 export curbs on heavy RE elements (Dy, Tb, etc.) and magnets have choked global magnet production. For example, China produced an estimated 300,000 tonnes of NdFeB magnets in 2024, dwarfing any foreign output. In contrast, MP Materials in the U.S. only began small-scale NdFeB magnet output in early 2025, targeting 1,000 tonnes per year by late 2025. The crush of demand has kept Chinese downstream mills running at full capacity; Fastmarkets reports that in early 2024, heavy-REE prices (e.g., Dy and Tb oxides) were plunging due to weak demand from China’s magnet sector. (By mid-2024, dysprosium oxide had fallen 30% from its January level.) However, once China’s 2025 export curbs took effect, local demand surged and import prices shot up – for instance, EU neodymium prices climbed to many times the Chinese domestic price.

Global prices for heavy RE oxides (terbium, dysprosium) dropped sharply in 2024 as Chinese downstream demand weakened. In July 2024, for example, dysprosium oxide (99.5% fob China) had fallen to about $230–280/kg, down from $350–380/kg in January. Terbium oxide fell similarly (to $730–795/kg). These declines reflected an oversupplied market and subdued demand for EVs and magnets in 2023–24. (Fastmarkets analysis notes that NdPr oxide (75:25 mix) fell from ~$60–63/kg in Jan 2024 to ~$50–52/kg by summer 2024.) The chart above illustrates the heavy-REE trend. After China’s export controls in 2025, however, prices reversed and surged outside China: by mid-2025, NdPr prices in Europe were reportedly up to six times Chinese levels, reflecting acute shortages and cost inflation.

EV Motor Production

Permanent-magnet synchronous motors (PMSM) are widely used in EV drivetrains for their efficiency. They depend on NdFeB magnets containing Nd, Pr (for magnetic strength) and Dy, Tb (for heat tolerance). With magnets in short supply, EV motor factories face delays. Some carmakers are examining magnet-free alternatives: for instance, BMW is introducing an electric motor design that avoids NdFeB magnets entirely in one model line. But such breakthroughs are rare – one analyst warned “there is no solution for the next three years except to… agree with China” on rare earths. In practice, most EVs on the road will need magnets. The current crunch means EV motor plants that rely on imported magnets may need to idle or curtail production unless they secure new supplies.

Automotive OEMs

Major automakers reacted swiftly. In 2021–2023, many (especially in China) relocated battery and parts supply chains, but now the magnet shortage has global OEMs scrambling. In mid-2025, American and European car companies publicly warned of production cuts: Ford shut its Explorer line in May, Suzuki stopped Swift assembly in India, and the Alliance for Automotive Innovation (GM, Toyota, VW, etc.) sent urgent letters warning that component-makers would soon be unable to produce alternators, motors, sensors, and other parts without magnets. In other cases, companies had quietly stockpiled or diversified earlier. For example, GM had pre-contracted substantial magnet output from U.S. suppliers: under CEO Mary Barra, GM agreed in 2021 to buy NdFeB magnets from MP Materials (in Texas) and from VAC (a German firm building an Alabama plant). These domestic sources were not yet online by early 2025, but the strategy positioned GM more favorably. (GM also backed up its supply via a July 2025 deal with magnet-maker Noveon.) By contrast, Ford and Stellantis had to secure emergency licenses in mid-2025 and conserve stock: Ford’s Farley said the company was “day to day” on magnet supply, and Stellantis reported only having enough magnets for the near-term. Overall, carmakers that anticipated risk (securing long-term contracts and offshoring magnet production) have fared better than those caught off-guard.

Company and Country Responses

Stockpiling and Incentives. Governments and firms are moving to build cushions against future shortfalls. In India, for instance, the government in mid-2025 held talks with automakers and suppliers to create a strategic magnet stockpile, offering fiscal incentives for domestic magnet production. India – which holds 6.9 million tonnes of rare-earth reserves (third-largest globally) – has largely imported its magnets to date. The new plan would partly subsidize the price gap between China-made magnets and those made in India, and potentially draw investment into local processing. India is also beginning to explore its own Nd deposits (through the National Critical Mineral Mission) and even exports raw Nd oxide to Japan due to lack of domestic refining. India’s stockpiling approach mirrors Western moves: the U.S. government has quietly accumulated rare-earth stocks (e.g. planning to buy hundreds of tonnes of NdPr oxide and magnet blocks in 2024–2025) and offers subsidies to growers of magnet feedstock. Europe’s Critical Raw Materials Act similarly encourages member states to secure supply (via strategic projects and storage quotas, though it is still in early stages).

Diversification and Reshoring

 Automakers and governments are aggressively seeking alternative suppliers and onshoring production. In the United States, the Biden administration and Pentagon have invested in domestic rare-earth projects. For example, the Department of Defense backed MP Materials’ U.S. separation plant (Mountain Pass, CA) and its new magnet facility (Fort Worth, TX) with roughly $450 million in grants. By 2025 MP Materials reported producing 1,300 tonnes of NdPr oxide and plans to make ~1,000 tonnes of NdFeB magnets/year. Lynas (Australia’s major RE miner) is also expanding in the U.S.: its Texas facility now processes NdPr from Mountain Pass and will open a heavy-REE separation plant in Louisiana with U.S. funding. In late 2025 Lynas announced a $117m plan to build a Malaysian separation plant capable of 5,000 tpa of heavy-REEs (Dy, Tb, etc.) from Australian feedstock – aimed at meeting “rising demand” outside China. Likewise, EV battery and motor makers are sourcing magnets from Asia-Pacific: a leading Chinese magnet producer (Baotou INST Magnetic) has shifted some production to Vietnam at clients’ request.

In Europe, automakers have begun diversifying: e.g. Niron Magnetics (U.S.) won EU funding for magnet production, and jointly Japanese–Canadian Arafura project aims to supply NdFeB feedstock. Japan and South Korea are partnering on overseas RE mines. The U.S. and Japan signed frameworks to invest jointly in minerals projects (e.g. JOGMEC programs) and are promoting recycling and alternative technologies. Japan itself has earmarked billions for domestic critical-minerals development (roughly ¥400 billion by 2027) to reduce China dependence

Overall, the scramble is to create multiple supply lines: new mines in Australia, North America and Africa; processing plants in Europe, U.S. and Asia; and even recycling. For example, a French startup (Neutral) now recycles rare-earth magnets from about 400,000 end-of-life vehicles per year, supplying 15 European brands – though such efforts are still nascent and face scaling challenges.

China remains far-and-away the world’s largest supplier, but Australia (and to a lesser extent Myanmar/Vietnam) are poised to play bigger roles if processing capacity is expanded. The U.S. and Japan are investing heavily in domestic/refined supply, but their 2023 output was tiny by comparison (the U.S. mined 43,000 t but imported ~95% of its REOs). Export shares of RE materials and magnets are essentially controlled by China today – for example, China provided 90% of U.S. RE imports 2019–2022 – and the new licensing policy formally codifies that leverage.

Economic and Industrial Impacts

China’s export curbs have triggered supply shortages and cost inflation in the EV sector and beyond. In the immediate term, affected firms have scrambled to secure whatever magnets they can, often at much higher prices. European magnet makers report paying multiples of Chinese market prices due to the licensing choke-point. These higher input costs squeeze automaker margins and raise the cost of EV production globally. For example, Ford admitted that despite the license relief, the rare-earth situation remained critical and would “continue” to impact costs. In response, OEMs have renegotiated supply contracts and accelerated planned purchases. GM publicly cited cost advantages in securing domestic supply ahead of competitors. Governments (U.S., Japan, EU) have committed to procure magnets or provide subsidies, implicitly reallocating some industry profits to underwrite new capacity.

Over the long term, the controls are reshaping sourcing strategies. Many companies are diversifying supply contracts to include non-Chinese sources and recycling. For example, electronics giants like Apple have requested magnet suppliers in Vietnam and Japan to reduce China reliance. Meanwhile, Western governments are funding new mining and processing projects, reshuffling global investment. In the U.S. and Australia, private investment in rare-earth separation and magnet factories has surged (spurred in part by tax credits and defense grants). Conversely, Chinese policy may deter foreign investment in China’s rare-earth sector due to regulatory risk.

However, some sectors face limitations: hybrid and small EV motors can partly substitute SmCo or sintered Nd magnets, but heavy-tractors and high-performance EVs still need Dy/Tb-enhanced NdFeB magnets. Many analysts conclude that unless alternative technologies (e.g. induction motors or free-piston engines) materialize, China will retain pricing power. One expert noted that for decades the only U.S. makers of NdFeB magnets essentially left for China, and rebuilding that chain takes years. Thus even if new mines and plants come online, supply will likely remain tight for the rest of the decade.

Recent Production, Prices, and Investment Trends

Global rare-earth mine production rebounded to roughly 350,000 tonnes (REO) in 2023 (from ~300,000 in 2022). This increase was driven by quota expansions in China and a jump in output from Myanmar (from 12,000 t in 2022 to 38,000 t in 2023). Australia’s production remained steady at ~18,000 t, while the U.S. saw ~43,000 t (all from Mountain Pass) However, with China and Western nations competing, new capacity is on the way: for example, Lynas plans to double its global RE oxide output by the late 2020s, and Arafura (Aus) and MP Materials (US) are expanding.

Price trends have been volatile. After hitting multi-year lows in 2024 (NdPr oxide ~$55–60/kg by year-end), prices spiked in mid-2025 on the export controls (European NdPr oxide reportedly reached ~$200/kg by late 2025). Heavy-REE oxides similarly surged. (For context: at the start of 2024 dysprosium oxide was ~$350/kg, fell to ~$230/kg by July 2024, but climbed above $500/kg in 2025.) These swings reflect both swings in demand and the new geopolitical premium.

Investment flows mirror the crisis. Governments have announced hundreds of millions in grants and loans: the U.S. DoD invested ~$450m in MP Materials (California, Texas) and Lynas USA facilities; the EU has allocated €2 billion under its Critical Raw Materials Act for RE projects; Japan pledged ~$2.7 billion for critical minerals (including RE) by 2027. In the private sector, companies like GM, BASF, and Vulcan Materials have formed new mining and refining consortia. Lynas’ October 2025 announcement of a new A$180m (US$117m) Malaysian heavy-REE plant exemplifies this trend. Analysts expect continued record investment: Wood Mackenzie forecasts that spending on rare-earth projects could top $1 billion annually through 2030 if shortages persist.

In summary, China’s export controls have created immediate shortages and price pressures on EV motor magnets, forcing OEMs to retool supply chains. Firms are increasing stockpiles and contracts with alternative suppliers, and new mining/refining capacity is being prioritized. The economic outcome is a partial “reshuffling” of the rare-earth supply web: we may see smaller but growing flows from Australia, Southeast Asia, and domestic (U.S./EU) sources, along with heavier recycling. However, given China’s still-overwhelming market share, fundamental shifts will take years, and the EV industry must navigate higher raw-material costs and more complex sourcing arrangements in the meantime.

Ghana’s Shrinking Food Import Bill (2020–2025)

Over the past five years, Ghana has consistently spent on the order of $2–3 billion annually to import food and agricultural products. For example, USDA-reported data show Ghana’s food and farm imports were about US$2.68 billion in 2023, rising to roughly $3.25 billion in 2024 (one government source quotes an annual bill of about $2 billion). These figures imply Ghana still sources roughly half its staples from abroad. (Notably, domestic currency inflation and exchange-rate shifts have made the cedi values even higher.) Despite the headline numbers staying large, some observers have noted that the import bill’s growth may be slowing – it “hovered at $2 billion in 2024, a figure that has remained stubbornly high for the past five years”. In other words, growth in import spending appears to have moderated. This report examines why the import bill has not risen even faster (and even shows signs of leveling off) by analyzing both economic forces and government policies.

Economic factors

A major driver has been Ghana’s macroeconomic turmoil since 2022. The cedi lost more than 50% of its value in 2022, and inflation surged – at one point, consumer inflation was above 40%. When the local currency plunges, the cost of imports soars. Many Ghanaian importers found it hard to raise enough foreign exchange to pay for food shipments. Indeed, in late 2022 the Bank of Ghana imposed foreign-exchange controls on staples (notably rice, poultry, vegetable oil, and other basic foods). This effectively reduced import volumes: goods like rice and chicken became scarce and more expensive. Simultaneously, rapid inflation squeezed consumer budgets and cut demand for higher-priced imported foods. Analysts note that with inflation eroding purchasing power, many Ghanaian households began cutting back on “luxury” food purchases – even if prices hadn’t jumped, basic necessities ate up more of their income. In short, depreciation and high inflation made food imports more costly and less affordable, slowing their growth. (By mid-2025, inflation had eased to ~12%, aided by a modest cedi recovery, but the 2022–23 shock was already felt in lower import volumes.) Global shocks – for exampl,e surges in world grain and fuel prices – also meant Ghana paid more per unit when it did import, further limiting the quantities it could afford.

Government programs and trade policies

Ghana’s authorities have simultaneously launched aggressive programs to boost domestic production of key foods. The flagship “Planting for Food and Jobs” (PFJ) program, begun in 2017, supplied subsidized seeds, fertilizers and machinery to farmers. PFJ dramatically raised yields – for instance, maize yields jumped ~67% and rice ~48% per hectare in 2017 – and expanded acreage. By 2019, PFJ inputs had generated on the order of 1.2 million extra tons of cereal and legume output. Such gains mean more staple grain is grown locally instead of bought abroad. Under the COVID-era Ghana CARES economic plan and related schemes, the government explicitly targeted import substitution in crops like rice, poultry, soya, cassava, tomatoes and sugar. For example, affordable financing and support were offered to rice millers, poultry hatcheries, and other enterprises to expand local supply.

In April 2025 the administration launched the new “Feed Ghana” program, part of an Agriculture-for-Transformation agenda. President Mahama noted the “staggering $2 billion” food import bill and promised a push on smart farming, mechanization, and value chains. Feed Ghana prioritizes maize, rice, poultry, and other import-intensive commodities, and includes initiatives like farmer service centers (providing equipment and training), urban vegetable gardens, and a nationwide poultry project (“Nkoko Nketenkete”) to ramp up chicken production. (Mahama’s government has also signaled import “bans” or tariffs on certain foods like foreign-grown pork, and has supported projects to produce feed and fish locally.) These policy changes – from subsidized inputs to import controls – are designed to slow the growth of the import bill by raising Ghana’s own output. Notably, in mid-2023, Ghana even temporarily banned imports of some poultry products and feeds on sanitary grounds (H5N1 avian influenza), which had the side-effect of immediately shrinking poultry import volumes.

Implications for local agriculture (opportunities and challenges)

A lower food import bill would give Ghana’s farmers and agribusinesses a bigger share of the domestic market. Opportunities include: more stable demand for local cereals, meat, and vegetables; new jobs in agro-processing; and increased foreign exchange retention. For example, the government’s push into domestic poultry (e.g., a new 100,000-bird training farm) aims to meet nearly all national chicken demand locally within a few years. If Ghana’s farmers can continue raising yields and output (through the above programs), that could reduce waste (nearly 30% of grains and 50% of fruits/vegetables are lost today) and turn lost surplus into real supply for consumers. Many analysts argue that mobilizing this latent production (worth about $1.9–2.0 billion a year) could effectively feed hundreds of millions of Ghanaians without imports. In broad terms, a shrinking import bill would mean stronger food self-sufficiency: Ghana would be less exposed to global price swings, and its agriculture could become a driver of growth rather than a drain on foreign reserves.

However, several challenges could slow this transition. Local farmers still struggle with high input costs, limited irrigation, and erratic weather. For instance, a 2024 drought cut Ghana’s maize harvest by nearly 30%, forcing a spike in imports despite high prices. Without continued investment, productivity gains may plateau. Ghana’s food systems also lack adequate storage, processing and logistics – the very bottlenecks that cause massive post-harvest losses. In practice, some staples like wheat have no domestic substitute, and meat/vegetable consumption remains high even as incomes stagnate. Policymakers must also ensure that reducing imports does not trigger shortages or inflation; indeed, experts warn that overdependence on imports has driven food-price inflation in Ghana, and cutting off imports too fast could keep prices high if local supply cannot ramp up.

In summary, Ghana’s food import bill remains very large but its rise has been tempered by both economic headwinds (currency collapse, forex limits and inflation) and deliberate policies to grow local output. The trend reflects a tug-of-war: on one side, falling import volumes from tighter markets and policy controls; on the other side, growing food demand and remaining yield gaps. For local agriculture, a declining import bill signals a big chance (bigger home market and investment) but also warns of challenges (meeting that demand reliably). With the right support, Ghana aims to turn those challenges into opportunities – so that more of the country’s food is grown and processed at home.

The African Continental Free Trade Area (AfCFTA) aims for a single continental market, but its success depends on seamless cross-border payments. To that end, Afreximbank and the African Union launched PAPSS in January 2022 as a centralized RTGS platform for local-currency settlements. PAPSS is designed to let African businesses pay each other in their own legal tenders (for example, Egyptian pounds to Kenyan shillings) in near–real time, bypassing USD intermediaries. In the words of PAPSS’s CEO, this infrastructure keeps payment flows inside Africa (avoiding expensive routes via New York or London) and unlocks a $3.4 trillion intra-African market.

Mechanics and Processes

PAPSS operates as an RTGS payment infrastructure connecting African central and commercial banks. According to its official description, it “enables the efficient flow of money securely across African borders” by collaborating with central banks and payment service providers. Key features include:

• Flow of transactions: A payer initiates a cross-border transfer through their local bank or PSP in the payer’s currency. The payment instruction is sent via PAPSS through the originator’s central bank to the beneficiary’s central bank, which ultimately credits the recipient’s account in the local currency.
• Validation and routing: PAPSS validates each instruction (fraud checks, balances, compliance) and routes it to the correct destination central bank, which in turn settles it with the local receiving bank. This avoids the need for correspondent banking relationships.
• Pre-funding and instant settlement: Banks and PSPs pre-fund PAPSS accounts to guarantee liquidity. In practice, transactions clear in roughly 2 minutes, as the system ensures funds are available before sending.
• Daily net settlement: At the end of each day, all bilateral obligations are netted out. PAPSS instructs each central bank (using Afreximbank as a settlement agent) to settle remaining net differences. Recipients receive final credit in their local currency once settlement is complete.

These processes transform what used to take days or involve multiple currencies into a single-step transfer. For example, when PAPSS launched in Comoros (Aug 2024), its central bank highlighted that payments between Comoros and any other African country could now be completed in ~120 seconds in Comorian francs, without first converting to a foreign currency.

Local-Currency Settlements and Dollar Bypass

By settling in local legal tenders, PAPSS drastically cuts costs and time compared to legacy U.S.-dollar corridors. Internal estimates suggest a $200 million cross-border payment could incur 10–30% in fees under the dollar-based system, whereas using PAPSS in local currencies cuts it to about 1%. Africa could therefore retain an estimated $5 billion annually that would otherwise leak out in foreign exchange fees. Crucially, PAPSS keeps funds on the continent. Before PAPSS, “over 80% of our trade payments” had to route through New York/London bank networks. Now those funds can remain within African banking systems.

2024–2025 Developments and Expansion

PAPSS usage has ramped up significantly. January 2024: Banque Centrale de Tunisie became PAPSS’s first North African member (the 13th overall country) under a new “commercial bank settlement” model. Tunisian officials immediately touted using dinars for intra-African trade to preserve foreign reserves. August 2024: The Central Bank of Comoros joined PAPSS; its launch announcement noted Comorians can now make continent-wide payments “directly in Comorian francs” in ~120 seconds.

By late 2024, PAPSS had officially onboarded 16 central banks and 144 commercial banks. That year also saw the successful pilot of the PAPSS African Currency Marketplace, which settled transactions in 12 different African currencies. All told, 15+ countries – from West, East, and Southern Africa – will be live by the end of 2024.

2025 (YTD): Adoption has accelerated. By mid-2025, PAPSS connected about 17 African countries and 150+ banks. To boost usage, several member governments have taken new measures. For example, Nigeria’s central bank (April 2025) dramatically streamlined KYC/AML paperwork for PAPSS payments (requiring only basic documents on individual transfers ≤$2,000 and corporate transfers ≤$5,000). This policy explicitly aims to make PAPSS “faster, more cost-effective and more inclusive” for Nigerian businesses under AfCFTA. Also in 2025, PAPSS introduced its African Currency Marketplace commercially (announced July 2025 at the Afreximbank Annual Meeting), enabling a transparent order-book for African FX swaps.

Barriers to True FX Integration

Despite progress, significant hurdles remain to full PAPSS integration and broad adoption:

• Liquidity/pre-funding requirements: PAPSS’s instant settlement relies on banks’ pre-funding their accounts in each local currency corridor. This ties up capital and can strain banks’ liquidity, especially in smaller economies. Many institutions may be reluctant to park large balances without established trust in the system.
• Currency convertibility controls: Numerous African currencies are subject to capital controls or low convertibility. A recent study highlights “currency-convertibility restrictions” as a binding constraint on PAPSS uptake. In practice, corporate funds often get “trapped” because strict FX rules prevent easy cross-border movement of proceeds. (Afreximbank notes, e.g., that over $2 billion in airline revenues are stuck in African currencies due to such controls.)
• Regulatory divergence: PAPSS participants face differing KYC/AML rules and data-localization laws across countries. Researchers warn that inconsistent compliance standards significantly slow cross-border payment system diffusion. Until regulators harmonize these rules (for example, by mutual KYC recognition), commercial banks may find onboarding too complex.
• Infrastructure gaps: Much of Africa remains cash-driven and underbanked, and not all regions have reliable digital payment rails. Limited internet connectivity and legacy banking systems (especially outside major cities) challenge real-time mobile and online PAPSS transactions. Enhancing fintech infrastructure and outreach is still needed in many markets.
• Trust and coordination issues: Some central banks perceive PAPSS as overlapping with national payment projects, raising questions of “ownership and alignment”. Without clear roles, there’s a risk of turf battles or duplication. Moreover, businesses and banks must trust that local currencies will hold value across borders; currency volatility can deter usage. As one expert warned, if central banks don’t cooperate and see PAPSS as complementary, “that tension could slow adoption or limit its effectiveness.”

Together, these barriers underscore why PAPSS adoption has been “patchy and uneven”. Analysts project that without phased FX liberalization, harmonized KYC rules, and a pan-African fintech passport regime, AfCFTA’s digital trade goals may not be fully achieved.

Implications for Central Banks, Commercial Banks, and SMEs

PAPSS’s rise has distinct effects on different stakeholders:

• Central banks: National monetary authorities now act as settlement agents for AfCFTA trade. They must manage pre-funded foreign currency pools and adjust FX policies to accommodate local-currency settlement. In practice, some have eased controls (e.g. Nigeria allowing banks to source FX onshore). Central banks could benefit from better cross-border liquidity and monetary integration, but they also shoulder new responsibilities for system governance. For PAPSS to scale, many experts say central banks must coordinate (e.g., agreeing on common KYC/AML frameworks) and, where possible, liberalize currency regimes.
• Commercial banks: By joining PAPSS networks, banks gain new revenue opportunities (cross-border fees, trade finance) and can offer customers intra-African services in local currency. Several large banks in Nigeria, Kenya, and other pilot countries are already connected. However, banks must integrate PAPSS into their IT and mobile platforms (CBN notes Nigerian banks will embed PAPSS in their apps). They also need to manage FX risk from operating in multiple currencies and ensure sufficient funding. Smaller banks and fintechs may face higher hurdles due to limited capital and expertise.
• SMEs and businesses: The greatest immediate beneficiaries are companies selling across African borders. Lowered paperwork (as Nigeria’s policy did for transfers up to $5k) and near-zero FX fees mean SMEs can trade more freely. A Kenyan trader, for example, can sell to partners in West Africa and receive naira instantly as shillings, without dealing in dollars. This expands market access – essentially turning a 1.3 billion-person continent into their customer base. Early adopters like ZEP-RE (a reinsurance co.) praise PAPSS as “a dream come true” for liquidity. In sum, PAPSS promises to unlock growth for small and medium enterprises by making pan-African commerce as easy as domestic transactions.

Strategic Efforts to Boost Usage and Interoperability

Recognizing these challenges, stakeholders are pursuing multiple strategies:

• Regulatory reforms: Policymakers are simplifying rules to encourage PAPSS use. Nigeria’s April 2025 circular drastically cut the documentation required for small PAPSS transfers. Continental bodies (AU/Afreximbank) are also advocating phased FX liberalization and even a “pan-African fintech passport” to harmonize standards. Such steps would make it easier for banks to operate across borders.
• Liquidity initiatives: The launch of the PAPSS African Currency Marketplace (PACM) directly addresses inconvertibility by pooling liquidity. PACM creates an order-book for African FX, allowing participants to swap currencies peer-to-peer “without passing through hard currencies”. This builds a continent-wide reserve of local currencies, helping to eliminate trapped capital and smooth exchange flows.
• Technology integration: PAPSS is partnering with fintech firms to modernize. The blockchain-enabled PACM (built with Interstellar) improves transparency and speed. Commercial launch of PAPSS in banks’ digital channels is a priority: PAPSS leadership has urged banks to integrate the system into mobile and online banking for wider adoption. APIs and security frameworks are also being developed to connect existing national payment systems (e.g. Kenya’s or Nigeria’s instant payment platforms) into PAPSS.
• Outreach and capacity-building: Governments and Afreximbank have held roadshows, workshops and trade-fair events to educate banks and traders. For example, in August 2024 a PAPSS workshop in Moroni brought together Comoros’s banks to explain system advantages and onboarding procedures. Similar seminars in Ghana and Rwanda have aimed to spur sign-ups. These efforts build awareness and trust, making commercial banks and SMEs more comfortable with the new rail.
• Regional cooperation: African leaders continue to endorse PAPSS. In 2023 the AU Assembly directed Afreximbank to deploy PAPSS continent-wide. Related AfCFTA initiatives (like a “Guided Trade” pilot) plan to use PAPSS for invoicing and settlements. With these mandates, all countries are expected to connect by 2030, creating a truly pan-African payments union.

Country Case Studies and Adoption Insights

• Nigeria: The Central Bank of Nigeria has been proactive. In addition to the April 2025 KYC reforms, the CBN is actively onboarding domestic banks (22 Nigerian banks were live by mid-2025). By empowering banks to source FX locally and streamlining paperwork, Nigeria aims to spur its exporters to “utilise our secure, local currency-based platform” for AfCFTA trade. This model could be replicated by other large economies.
• Tunisia: As the first North African entrant (2024), Tunisia provides a clear example. The BCT joined under a “commercial bank settlement” arrangement that allows Tunisian dinars to be used in PAPSS transfers. Tunisian officials emphasize that this preserves foreign reserves (by avoiding dollar purchases) and strengthens the dinar’s role in regional trade.
• Comoros: This small island began PAPSS in 2024 as part of a development push. Its central bank announced that Comoros now enjoys cross-border payments in Comorian francs, with transactions completed in ~120 seconds at lower cost. Local banks are being urged to connect, which would allow even microfinance clients to engage in intra-African commerce without forex hurdles.
• East Africa (Kenya/Rwanda): Early adopters of AfCFTA trading, these countries are integrating PAPSS for cross-border e-commerce. For instance, Kenya Airways used PAPSS’s currency marketplace to directly swap Naira earnings into Kenyan Shillings without a third currency. Rwanda’s central bank joined PAPSS as of 2024, reflecting the region’s momentum toward digital trade settlement. Kenya is also in the running to host PAPSS’s headquarters, underlining its commitment to the project.
• Regional reach: Beyond these cases, PAPSS spans many sub-regions. Initially rooted in the West African Monetary Zone (Nigeria, Ghana, Gambia, etc.), it now includes Southern and North African members. The growing list of 17–18 countries implies that even formerly fragmented markets are lining up to participate. Each new country (or region) that joins provides another proof-of-concept, encouraging others to follow suit.

Conclusion

PAPSS represents a bold step toward African financial sovereignty. By wiring together 1.3 billion people with a common payments infrastructure, it tackles the continent’s legacy of dollar-based trade and correspondent-banking bottlenecks. Recent data show that PAPSS is gaining critical mass: tens of central banks and well over 150 commercial banks are now connected. Its innovations – like the African Currency Marketplace – directly address continent-wide pain points of convertibility and liquidity.

Trade between Africa and Asia has surged in recent years, creating new South–South corridors that bypass traditional Western financial channels. In 2024, Asia–Africa trade is likely to exceed $400 billion (with China–Africa alone ~$296 billion). Major infrastructure projects (ports, railways, pipelines) and bilateral agreements are knitting Asian and African markets closer. Crucially, Chinese, Indian, and Southeast Asian investors increasingly settle trade in local currencies, reducing reliance on the US dollar and SWIFT. This shift – quietly championed by leaders from ASEAN to BRICS – is reshaping global trade patterns in the Global South.

Chinese Investment and Yuan Settlements

China is systematically pushing its yuan into Africa to support Belt & Road corridors. In 2025 alone, Chinese banks and African financial institutions signed multiple yuan-denominated trade agreements. For example, during Premier Li Qiang’s visit to Egypt, China and Egypt agreed on a yuan–dinar swap and expanded UnionPay and CIPS (China’s SWIFT-alternative) payment links for the Suez trade zone. Other African countries – notably South Africa, Nigeria and Angola – have struck yuan-settlement deals with Beijing. These accords allow exporters and importers to invoice directly in RMB, bypassing dollar credit lines.

The infrastructure for moving yuan is expanding: China’s Cross-border Interbank Payment System (CIPS), launched in 2015, now connects Chinese banks to their global counterparts. In mid-2025, two African institutions – Afreximbank and South Africa’s Standard Bank – joined CIPS as direct members. This allows them to clear yuan payments without an intermediary (and without routing them through Western SWIFT channels). Beijing has made dozens of currency-swap lines and payment pilots with African central banks. In short, Chinese projects on the continent are increasingly financed and repaid in yuan, reinforcing Asia–Africa corridors outside US/EU banking.

India’s Rupee Strategy in Africa

India is likewise encouraging local-currency trade with Africa. New Delhi has struck deals to settle more of its exports in rupees. In July 2023, India and Malaysia agreed that bilateral trade could be invoiced in INR. India is also negotiating rupee settlement pacts with key suppliers (like Saudi Arabia and the UAE) and has a longstanding rupee-for-ruble mechanism with Russia. To facilitate this, many foreign banks now hold Rupee accounts in India. By late 2024, 18 countries – including Kenya, Tanzania, and Mauritius – had banks with special Vostro Rupee accounts in Indian banks. This infrastructure lets an African importer receive rupees directly and swap them locally, skipping dollar funding.

Indian businesses on the continent welcome this trend. Trade between India and Africa recently topped $100 billion (nearly double from 2019), yet exporters often face costly currency hedging or credit constraints. As one analyst notes, “promoting Rupee-denominated trade could alleviate local liquidity issues, stabilizing costs for African importers and encouraging deeper integration”. In practice, this means a Kenyan firm importing Indian machinery might pay in rupees (via a correspondent bank) instead of sourcing scarce dollars – effectively bypassing Western banks and dollar exchange markets.

ASEAN and Southeast Asian Initiatives

Southeast Asian economies have also built local-currency payment networks, which indirectly strengthen Asia–Africa links. Since 2016, Thailand and Malaysia have operated a Local Currency Settlement Framework allowing firms to settle trade in baht or ringgit. Indonesia joined the scheme in 2018, and new QR-code payment arrangements now let people pay cross-border in baht, ringgit, rupiah or other ASEAN currencies without any dollar intermediary. These regional platforms have taken off: in the first half of 2025, ASEAN cross-border transactions in local currencies hit $14.1 billion (a 112% jump year-on-year). Officials credit the shift with making trade and investment more efficient and reducing FX volatility in Southeast Asia.

Although ASEAN’s schemes mainly cover intra-ASEAN trade, they set a precedent that ASEAN-led investors bring to Africa. For example, Singaporean agribusinesses (like Olam and Tolaram) are major players in Africa, and Thailand’s investors (like Charoen Pokphand) operate widely. These firms, aware of their own region’s LCSF, increasingly favor using baht, ringgit or rupiah in their African deals when possible, mirroring what they do at home. At the 2025 BRICS summit, Malaysian PM Anwar Ibrahim explicitly cited ASEAN’s local-currency model as one to emulate, urging emerging markets to challenge Western dominance by trading more in national currencies.

Alternative Payment Networks

Beyond specific deals, several new payment systems underpin these corridors. China’s UnionPay network has expanded across Africa, and its Cross-Border Interbank Payment System (CIPS) is being pitched as an alternative to SWIFT for RMB payments. Africa’s Standard Bank and Afreximbank joining CIPS means African exporters can receive yuan settlements without US or EU correspondent banks. Similarly, India’s growing use of Special Rupee Vostros allows trade flows to settle via UPI or other domestic rails in Asia.

Looking ahead, multilateral projects could further cement local-currency corridors. For instance, ASEAN central banks launched a multilateral QR-payments system linking Indonesia, Malaysia, Singapore, and Thailand. BRICS countries (which now include major African economies like Egypt and Ethiopia) are developing their own payment platform (“BRICS Pay”) for cross-border local-currency transfers. Combined with regional swaps and central-bank arrangements (e.g., the 2012 SAARC Currency Swap for INR), these tools let Africa–Asia partners transact directly in yuan, rupees, baht, etc., sidestepping U.S. dollar clearing entirely.

Implications for Global South Commerce

These Africa–Asia corridors are quietly redefining trade in the Global South. By settling in local currencies, Asian and African countries reduce exposure to dollar volatility and Western sanctions. Exporters in countries facing dollar shortages (like Sri Lanka, Bangladesh, or many African economies) can keep exporting by switching to rupees or yuan. Importantly, this deepens economic ties on Asian terms: Chinese, Indian, Thai, or Malaysian lenders and investors gain leverage in financing and projects.

At the same time, experts caution about the broader impact. The IMF notes that while local-currency arrangements improve resilience for participants, they also fragment the global payment system – potentially raising costs by up to ~7% of world GDP. For now, the dollar remains dominant in overall trade, but its share is slowly slipping in corridors driven by geopolitics and necessity. As one analysis put it, these developments embody a trade fragmentation trend away from the U.S. and Europe.

In sum, African and Asian leaders are building new South–South financial infrastructure to match growing trade. These corridors – from Mombasa to Mumbai to Manila – unite continents through local currencies. They reflect a vision, voiced at forums like BRICS, of the Global South “speaking as one” and leveraging homegrown monetary systems. The result is a more multipolar commerce: one where African exporters may soon invoice in yuans or rupees instead of dollars, and Southeast Asian investors fund projects in local notes. In doing so, they redefine Global South commerce on their own terms.

Key Takeaways:

1. Trade volumes are rising. Asia now takes ~40–45% of African exports (and vice versa), with Asia–Africa trade ~US$400B in 2024. China remains the largest player, but India, ASEAN, and others are growing fast.
2. Local-currency deals. China, India, and ASEAN countries have struck swaps and trade agreements to settle in RMB, INR, baht, ringgit, etc.. African banks (e.g., Standard Bank, Afreximbank) have joined networks like CIPS to process these payments locally.
3. Bypassing Western finance. These shifts reduce the use of dollar credit and SWIFT. CIPS, UnionPay, bilateral Rupee-Vostro accounts, and regional QR-pay systems let partners transact outside Western banking.
4. Economic empowerment vs. fragmentation. Local settlement can aid countries with dollar shortages and foster South–South ties. But IMF analysts warn that a fractured payment landscape may hurt efficiency.
5. Global South strategy. Emerging-market coalitions (BRICS, ASEAN) explicitly endorse this path. Leaders urge using local currencies to boost “Global South clout” and reduce dependence on Western-led systems