Africa’s debate about reducing dependence on the US dollar should not be framed as an ideological campaign against America. It is fundamentally about strategic resilience and national sovereignty.
Consider a hypothetical future crisis. Nigeria takes a foreign-policy decision that Abuja considers essential to its national interest, but Washington regards as threatening US interests. The disagreement might concern defence cooperation, energy exports, military basing, technology transfers or relations with another major power.
Nigeria could quickly discover that sovereignty is determined by more than territory, natural resources and armed forces. It is also determined by the infrastructure through which money moves.
When international trade is overwhelmingly invoiced and settled through foreign currencies and institutions, decisions made abroad can affect a country’s ability to receive export earnings, finance imports, purchase equipment and conduct international transactions.
Iran demonstrates the extreme consequences of this vulnerability. Africa should study its experience—not because African states should imitate Tehran, but because it demonstrates what can happen when geopolitical confrontation meets financial dependence.
The dollar is more than a currency
The dollar dominates international finance for sound economic reasons. American financial markets are exceptionally deep and liquid, US Treasury securities provide enormous pools of reserve assets, and decades of dollar-denominated commerce have created powerful network effects.
Africa therefore cannot—and should not—simply abandon the dollar.
The problem is concentration risk. When two African countries trade but their companies must acquire dollars to settle the transaction, commerce that is fundamentally African becomes dependent upon foreign-exchange liquidity and external financial infrastructure. During normal periods, this creates costs and increases demand for scarce foreign exchange. During geopolitical confrontation, it can become a strategic vulnerability.
The Iranian lesson
Washington’s economic confrontation with Tehran demonstrates the geopolitical power embedded within financial infrastructure. US sanctions have targeted Iranian banks, exchange houses, shipping companies and intermediaries while restricting sanctioned entities from accessing the American financial system.
The consequences extend beyond America itself. Banks elsewhere may still require dollar clearing, correspondent banking relationships and access to US institutions. Losing that access can impose enormous commercial costs.
Iran consequently developed alternative mechanisms involving intermediaries, barter arrangements, exchange houses and non-dollar currencies. Iranian oil revenues have increasingly been settled through currencies such as the Chinese yuan.
But Iran also demonstrates the weakness of building alternatives after confrontation has begun. Financial networks become more expensive, companies become reluctant to participate, and sanctions can expand into shipping, insurance and other services.
Africa should therefore build legitimate alternatives before they are required.
What if Nigeria disagreed with Washington?
Nigeria is not Iran. It maintains important relationships with the United States and Europe and is not confronting comprehensive Western financial sanctions.
But national strategy requires governments to consider circumstances that do not currently exist.
Suppose Nigeria eventually makes a sovereign decision that produces a severe disagreement with Washington. If Nigerian exports, international borrowing, corporate payments and essential imports remain heavily dependent upon dollar infrastructure, potential American leverage could extend far beyond direct US-Nigerian trade.
Nigeria would then confront an uncomfortable question: how much strategic freedom does a country possess if exercising that freedom could threaten its access to the financial infrastructure required for international commerce?
This is not an argument for confrontation with America.
It is an argument for insurance.
Africa already has an alternative
Africa does not need to construct an alternative financial architecture from scratch.
The Pan-African Payment and Settlement System (PAPSS) allows cross-border African payments using national currencies. A business can initiate payment in its domestic currency while the beneficiary receives funds in its own currency. The strategic significance is considerable.
A Nigerian company purchasing goods from Ghana should not automatically require dollars simply because one African company is paying another. Neither should trade between Nigerian and Kenyan businesses necessarily depend upon acquiring a currency issued on another continent.
Expanding local-currency settlement would reduce unnecessary demand for foreign exchange while strengthening the practical foundations of the African Continental Free Trade Area.
Nigeria should lead
Nigeria has particular reasons to accelerate this transition.
It possesses Africa’s largest population, one of its largest economies and considerable regional commercial influence. It also understands the consequences of dollar shortages.
Foreign-exchange scarcity has repeatedly affected Nigerian companies, importers and consumers. Meanwhile, dollar-linked stablecoins are becoming increasingly attractive for payments and protection against domestic currency depreciation.
This creates a paradox: digitalisation could actually produce greater dollarisation unless African financial systems provide credible alternatives.
Nigeria should therefore encourage transparent naira-denominated payment mechanisms and expand direct currency settlement with important trading partners.
Diversification, not de-dollarisation
Africa must also avoid replacing one dependency with another.
Moving transactions wholesale from dollars into Chinese yuan would not constitute financial sovereignty. It could merely exchange American dependence for Chinese dependence.
The objective should therefore be currency diversification rather than ideological de-dollarisation.
The dollar should remain available where commercially appropriate, the euro for relevant European transactions and the yuan for Chinese commerce. African currencies—including the naira, rand, cedi and shilling—should increasingly settle regional trade where liquidity permits.
The objective is not to construct an African financial fortress. It is to create multiple channels through which legitimate commerce can continue.
Currency sovereignty requires credibility
The greatest obstacle is internal.
Businesses hold dollars because they trust them. Governments cannot demand greater use of national currencies while inflation continuously destroys their purchasing power.
Nigeria cannot transform the naira into a credible regional settlement currency without strengthening the economy supporting it.
That requires lower and more predictable inflation, credible monetary policy, deeper capital markets, adequate reserves and confidence that legitimate transactions will not face arbitrary restrictions.
Currency sovereignty begins with currency credibility.
Reducing dollar dependence therefore requires African governments to make their own currencies more attractive to Africans themselves.
Build before the crisis
Iran provides the central strategic warning.
Once geopolitical confrontation begins, constructing alternatives becomes much harder. Banks become cautious, intermediaries demand premiums, companies withdraw, and financial restrictions can spread into shipping, insurance and technology. Africa should therefore build resilience during peacetime.
PAPSS should expand. Central banks should develop bilateral currency arrangements. More AfCFTA trade should be settled in African currencies where it is economically viable. African development institutions should increase local-currency financing, while regional foreign-exchange markets should become deep enough to support larger transactions.
None of this requires abandoning Western financial institutions.
It creates alternatives.
Financial sovereignty is national security
Africa spent much of the twentieth century achieving political sovereignty. The twenty-first century requires a broader understanding of financial sovereignty.
Nigeria should not assume it will ever face Iran’s circumstances, nor should African economic policy be constructed around hostility towards America. But national strategy cannot assume that today’s friendships will remain unchanged indefinitely.
For BusinessDay readers, the objective is therefore not ideological de-dollarisation but financial strategic autonomy.
Africa will continue using dollars for trade, investment and reserves. What it should reduce is the requirement to use dollars where African or partner currencies could perform the same function.
The strategic principle is straightforward: retain access to the dollar, build credible alternatives, expand national-currency settlement and ensure that no single external financial system can determine whether African states are capable of exercising their sovereign economic choices.
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