Kenyan Traders Embrace Chinese Currency
The Kenya Bankers Association (KBA) reported on Wednesday, August 2, that Kenyan merchants are increasingly using the Chinese Yuan instead of the U.S. Dollar when settling payments.
In an interview with Xinhua, Habil Olaka, CEO of KBA, revealed that one of the primary reasons for the transition was the expansion of Sino-Kenyan trade ties.
With numerous Chinese initiatives in the country, the KBA observed that the Yuan was becoming an alternative to the US dollar for settling trade-related financial transactions between Kenya and China.
“When two countries trade, they typically use a currency that is readily available in their respective countries,” Olaka explained.
Furthermore, Kenyan wholesalers and retailers obtain their merchandise from the world’s second-largest economy, making the Yuan an advantageous settlement currency.
The KBA’s chief executive officer disclosed the information while leading the introduction of the KBA’s 2022 Kenyan Banking Sector Total Tax Contribution study.
As the nation continues to struggle with a lack of dollars, Olaka disclosed that the majority of local commercial institutions had a yuan trading facility that made the Chinese currency accessible.
As trade between Beijing and Nairobi continued to expand, KBA explained that many merchants found the yuan to be the most suitable trading currency.
Historically, many traders utilized the dollar, but the use of the Yuan significantly reduces transaction costs by eliminating the need for multiple currency conversions.
To emphasize the growing prevalence of the Chinese yuan, KBA noted that most Kenyan banks had opened Chinese desks.
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Olaka was quoted by Xinhua as saying, “This is to serve the expanding Chinese business community in the East African nation.”
In 2016, when former President Uhuru Kenyatta’s administration announced it would begin financing directly in the Chinese yuan and other foreign currencies to reduce reliance on the dollar, the Chinese yuan began gaining momentum.
At the time, the Treasury disclosed that loans from China were received in yuan. As a result, the Ministry had to transmit the funds through a bank that converts the yuan into dollars and performs a similar conversion when making payments, incurring currency losses.
The yuan is expected to continue gaining ground against the dollar as China remains the United States’ largest trading partner.
According to research conducted by Carnegie in 2022, China accounts for 16% of Kenya’s total trade volume, significantly more than the European Union (14%) and the United States (4.5%).
“China was Kenya’s primary import partner in 2021. China’s imports totaled approximately Ksh441.4 billion.” Statista revealed further that China was becoming the nation of preference for Kenyan merchants.
Typically, traders who conduct business with China import electrical apparatus, spare parts, railway and trainway locomotives, iron and steel, and automobiles.
Kenyan Traders Embrace Chinese Currency
