{"id":9488,"date":"2024-11-27T07:36:02","date_gmt":"2024-11-27T07:36:02","guid":{"rendered":"https:\/\/azafinance.com\/?p=9488"},"modified":"2025-07-21T16:49:27","modified_gmt":"2025-07-21T13:49:27","slug":"what-you-should-know-about-cross-border-fx-in-africa","status":"publish","type":"post","link":"https:\/\/azafinance.com\/what-you-should-know-about-cross-border-fx-in-africa\/","title":{"rendered":"What You Should Know About Cross-Border FX in Africa","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"

For businesses operating in Africa, managing cross-border foreign exchange (FX) has become a key part of growth strategy. Currency fluctuations need to be taken into account, whether your business is engaging in international trade or running operations in multiple countries.\u00a0<\/span><\/p>\n

In this article, we will explore the intricacies of FX operations in Africa, sharing the learnings AZA Finance has gathered after operating in these markets for more than 11 years. Here is what\u00a0 businesses that regularly engage in international transactions should know about African FX.<\/span><\/p>\n

We’ll cover:<\/span><\/h3>\n

The Landscape of African FX<\/span><\/a><\/p>\n

Trends Shaping African FX<\/span><\/a><\/p>\n

Best Solutions for African FX<\/span><\/a><\/p>\n

Strategies for Effective Cross-Border FX Management<\/span><\/a><\/p>\n

The Landscape of African FX\u00a0<\/b><\/h2>\n

Market Variability & Liquidity Needs<\/b><\/h3>\n

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The Role of the U.S. Dollar<\/b><\/h4>\n

The dollar remains the dominant currency in international transactions in Africa. Why is this the case? Most countries rely on the U.S. dollar to pay foreign debts and purchase many essential goods and services. For instance, when governments purchase vaccines from other nations, they will most likely pay for these in dollars.\u00a0<\/span><\/p>\n

Additionally, <\/span>over 80% of African cross-border payment transactions<\/span><\/a> must be routed offshore for clearing and settlement by banks outside the continent. Consequently, intra-Africa trade is at about 16% of global trade.\u00a0<\/span><\/p>\n

This article by The Conversation<\/span><\/a> provides a detailed explanation on why dollar shortages happen in African countries. This scarcity has led to increased market volatility, directly impacting businesses that rely on regular cross-border transactions.<\/span><\/p>\n

Our CEO, Elizabeth Rossiello, captured the problem well for <\/span>CNBC earlier this year. <\/span><\/a>\u201cCross-border payments still cost African and African-based businesses too much. African businesses shouldn\u2019t have such a high price (in time or fees) to move into other African or G20 currencies or to make transfers across the continent or into Europe. Yet, they do.\u201d\u00a0<\/span><\/p>\n

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Varying Exchange Rates<\/b><\/h4>\n

In some African countries, a significant gap exists between official exchange rates and market rates. Countries most affected by this include Ghana, Nigeria, Zimbabwe, and several other West African nations.\u00a0<\/span><\/p>\n

This is not the case in East Africa, for instance, where there will be a Bureau de Change (BDC) at hand to offer this retail service. BDCs are licensed by central banks and set their own rates within the central banks\u2019 indicative rates.<\/span><\/p>\n

Forex shortages and local currency volatility played a big part in the rise of this parallel economy. Governments are doing their best to respond to the circumstances that led to this in the first place. Some examples of measures taken:\u00a0<\/span><\/p>\n