Banco de Fomento Angola (BFA) plans to become the first Angolan lender to connect directly to China’s Cross-Border Interbank Payment System (CIPS) by next year. This move signals a shift in African financial settlement, as commercial banks increasingly bypass the U.S. dollar to facilitate direct trade between African nations and China using the yuan.
Integration into CIPS and the Shift from Dollar Settlements
BFA’s upcoming integration into CIPS represents a strategic pivot for Angola, one of China’s primary crude oil suppliers. By connecting to the system, the bank aims to lower transaction costs and shorten settlement times for businesses that trade directly with Chinese counterparts. According to industry data, businesses are increasingly requesting yuan-denominated settlements to avoid the intermediate step of converting local currencies into U.S. dollars.
Launched by Beijing in 2015, CIPS serves as an international payment infrastructure for the renminbi. For African lenders, this infrastructure provides a direct route to settle obligations without relying on dollar-based correspondent banking.
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Angola’s Regulatory Pivot Toward the Yuan
The move by BFA follows a series of policy adjustments by Angolan authorities to integrate the yuan into the national financial framework. Earlier this month, the central bank of Angola authorized commercial lenders to include the yuan in their mandatory foreign currency reserves. The currency now holds a status comparable to the U.S. dollar, the euro, and the South African rand.
Complementing this, the Angolan finance ministry recently announced intentions to explore yuan-denominated borrowing. The goal is to access financing at potentially lower rates than those available through traditional dollar-denominated markets. These steps align with broader trends across the continent, where nations are increasingly utilizing currency swap arrangements and yuan financing to deepen economic ties with Beijing.
The Growing Financial Footprint of China in Africa
China currently stands as Africa’s largest bilateral trading partner. This status is supported by the removal of tariffs on imports from 53 African countries and sustained investment across mining, infrastructure, and agriculture. As trade volumes rise, financial institutions are building the necessary plumbing to support these flows.
While the U.S. dollar remains the dominant global reserve currency, the growing adoption of the yuan reflects a structural change in how African markets manage cross-border trade.
Frequently Asked Questions
What is CIPS?
CIPS is China’s Cross-Border Interbank Payment System, launched in 2015 to facilitate international transactions settled in the Chinese yuan.
Why are African banks moving toward the yuan?
Banks are adopting the yuan to reduce transaction costs, shorten settlement times, and decrease reliance on the U.S. dollar for trade with Chinese partners.
Is the U.S. dollar being replaced in Africa?
The U.S. dollar remains the primary global reserve and trade currency, but the yuan is seeing increased use as a direct reflection of rising trade volumes between Africa and China.
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