Cross-Border Payments Remain the Hardest Part of African Trade

The conversation around intra-African trade often begins with scale. A continent of more than 50 countries, a combined market measured in billions of people, a policy framework intended to lower barriers. Yet trade within Africa still sits below 20%, far from the roughly 60% seen in Europe and around 50% in parts of Asia. The gap is familiar. The explanation, less so.

At Africa Tech Summit Nairobi, a panel moderated by Emmanuel “Babz” Babalola, Chief Commercial Officer at Fincra, returned the discussion to mechanics rather than ambition. Nena Nwachukwu, General Manager Nigeria at Conduit, Carol Ogallo, Head of Lending Business at Choice Bank, and Paschal Okeke, Head of Growth and Trading at CrissCross, spoke less about opportunity and more about friction. Their focus stayed on payment rails, compliance, and the institutional habits that keep African markets operating as adjacent systems rather than a single commercial space.

The tone was practical. No one disputed that trade is growing. The argument instead circled around why growth continues to feel harder than it should.

Fragmentation as Structure, Not Accident

Fragmentation tends to be described as a problem waiting to be solved. The discussion suggested something more structural. Payments infrastructure reflects political boundaries, regulatory traditions, and currency regimes that developed independently. Those divisions now show up in compliance requirements, licensing rules, and settlement processes.

Local systems function well. Kenya moves money domestically with speed through mobile money infrastructure. Nigeria’s interbank settlement system handles instant transfers at scale. Regional payment arrangements exist in parts of Southern and East Africa. None of this translates easily across borders.

The result is paradoxical. Sending money from one African country to another can involve more intermediaries than sending funds to Europe or the United States. Currency conversion often passes through USD, introducing cost and liquidity pressure. Carol Ogallo described the banking reality plainly. Each conversion introduces expense and uncertainty, and for countries with limited dollar liquidity, that uncertainty compounds.

Fragmentation persists because it is embedded in regulation. Each jurisdiction manages capital controls, compliance obligations, and financial supervision according to domestic priorities. Integration requires alignment that extends beyond technology.

The Dollar Problem That Never Quite Leaves

Cross-border payments inside Africa remain heavily dollarized. Traders and businesses rarely transact directly between local currencies. Instead, transactions move through USD pairs, even when the underlying trade is regional.

This structure creates predictable strain. Central banks must manage foreign reserves carefully. Businesses absorb conversion costs that erode already thin margins. According to the discussion, sending money across African borders can reach costs close to 8%, above the global average of roughly 6%. For small businesses operating on margins near 15%, payment friction alone can erase profitability.

Banks respond rationally. When settlement timelines stretch across days and reconciliation errors occur, credit risk rises. Ogallo noted that lenders struggle to assess cash flow reliability when payments remain informal or delayed. Financing then becomes collateral-driven rather than transaction-driven, excluding many small and medium-sized enterprises that dominate regional trade.

The outcome is circular. Weak payment visibility limits credit. Limited credit constrains trade growth. Trade growth, in turn, fails to generate the data banks need to extend financing confidently.

Regulation as the Hard Edge of the Problem

Technology featured heavily in the conversation, though rarely as the main obstacle. Paschal Okeke framed the issue from a trading perspective. Speed and cost can be engineered around. Regulatory disruption cannot.

Licensing requirements differ widely across jurisdictions. A company operating legally in one market may need separate approvals elsewhere, each with different compliance interpretations. Regulatory intervention can freeze accounts or interrupt liquidity flows without warning, forcing businesses to prioritize survival over expansion.

The comparison with Europe surfaced repeatedly. A single licensing framework allows financial firms to operate across multiple markets. Africa’s regulatory landscape offers no equivalent continuity. Passporting initiatives in countries such as Rwanda and Ghana exist, though adoption remains limited.

This creates hesitation among infrastructure builders. Scaling across borders requires legal certainty as much as technical capacity. Without it, investment timelines stretch and operational risk increases.

Payment Certainty and the Credit Question

Banks approach cross-border payments differently from fintech operators. Their concern is predictability. If settlement fails or delays occur, lending models collapse.

Ogallo emphasized that many cross-border transactions remain invisible to formal financial institutions. Informal trade continues to carry substantial volume, yet banks cannot underwrite what they cannot observe. Payment rails therefore become a prerequisite for credit expansion rather than a secondary concern.

Reliable settlement changes how risk is priced. Faster reconciliation reduces disputes. Consistent payment histories allow credit officers to evaluate borrowers beyond collateral. In theory, improved infrastructure lowers borrowing costs over time. In practice, progress remains uneven across regions.

An underlying tension emerges here. Fintech firms often prioritize speed and user experience. Banks prioritize risk containment. Both rely on the same infrastructure, but their incentives diverge.

Stablecoins, Coordination, and the Limits of Technology

Stablecoins entered the discussion as an alternative layer for cross-border settlement. The appeal is obvious. Blockchain-based transfers can move value within seconds, bypassing some of the delays associated with correspondent banking networks.

Yet the conversation returned again to regulation. Stablecoins may reduce settlement friction, but they do not eliminate licensing requirements or jurisdictional oversight. A stablecoin operating across multiple countries still encounters local regulatory boundaries once it interacts with banking systems.

Nwachukwu pointed out that the underlying technology already exists and functions in other regions. The obstacle lies in coordination between regulators and builders. Adoption requires institutional comfort, not technical invention.

Okeke expressed caution about timelines. Regulatory alignment across dozens of jurisdictions tends to move slowly. Infrastructure can be built faster than policy evolves, creating a recurring mismatch between capability and permission.

Integration Without Uniformity

The panel circled back to a pragmatic conclusion. Africa may not reach unified regulation in the near term. Progress may instead emerge from clusters of compatible markets that connect first, gradually expanding outward.

Payment rails such as the Pan-African Payment and Settlement System offer one path, though access remains concentrated among traditional banks. Fintech participation depends on partnerships that reintroduce layers of dependency. The system exists, but scale remains partial.

What becomes clear is that intra-African trade is not constrained by absence of innovation. The constraint lies in coordination across institutions that move at different speeds. Fintech companies build quickly. Regulators move cautiously. Banks operate between those timelines.

The continent’s payment systems already solve domestic problems effectively. Connecting them across borders remains the unfinished work. Whether that connection arrives through regulatory convergence, market-led integration, or gradual interoperability remains unresolved. What is certain is that trade will expand only as fast as money can move with certainty across borders.

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