Why the Most Dollarised Economy in East Africa Needs the Yuan the Most

MOGADISHU (SONNA): Bank of Kigali announced this week that it had joined China’s Cross-Border Interbank Payment System, known as CIPS, becoming, by the account of analysts who track the system, the first bank in East Africa to join directly. For a Rwandan importer the change is practical rather than political. An invoice from a supplier in Guangdong can now be paid directly in renminbi, without first being converted into dollars and routed through a chain of correspondent banks. Settlement that used to take several business days can now happen almost immediately.

That is a small announcement from a small country, and it would be easy to overlook. It should not be overlooked in Mogadishu, because it is one more piece of a map that is being drawn around Somalia, and Somalia is not on it.

The map

The pace of the past year has been remarkable. In November 2025 Standard Bank, the largest lender in Africa by assets, became the first African bank admitted to CIPS. In its first four months it processed around five hundred million dollars in renminbi transactions. By the end of its first year it had passed eight billion yuan, roughly one point two billion dollars, and had extended access to its clients in Angola, Ghana, Kenya, Lesotho and Tanzania, with more countries promised before the end of this year.

In June the People’s Bank of China and the Industrial and Commercial Bank of China went further, jointly authorising Standard Bank to operate as the Renminbi Clearing Bank of Africa, the first lender based on the continent to hold that status. Its clearing mandate covers nineteen countries. Meanwhile Kenya has converted part of its dollar-denominated borrowing into yuan, and at least five other African governments have been reported to be studying the same move. Absa, the South African group with a large presence across East Africa, and Ecobank, listed in Nigeria and active across West Africa, are reported to be in talks to join the system as well.

Look at that list geographically. Kenya to the south-west. Tanzania beyond it. Rwanda now. The countries Somalia trades with, competes with and has just joined in the East African Community are building a second channel for settling trade with China. Somali banks are not part of it.

How a Somali importer pays today

Consider what happens when a Somali trader buys goods from China, which Somali traders do constantly. Walk through any market in Mogadishu, Hargeisa or Kismayo and the shelves carry Chinese electronics, solar panels, motorcycles, textiles, building materials and household goods. China is among Somalia’s most important sources of imports. That is typical of the region rather than peculiar to us. A Standard Bank survey across ten African countries found that sixty-seven per cent of businesses said they do business with China.

Here Somalia’s situation differs from its neighbours’ in one important respect. A Kenyan importer holds shillings and must convert them into dollars before converting again into yuan, so for Kenya much of the saving from CIPS comes from removing a currency conversion. Somalia has no such conversion to remove. The economy is dollarised, the Somali shilling is little used for anything beyond small transactions, and a Somali importer already holds dollars.

The Somali cost lies elsewhere, in the route the money takes rather than the currency it is in. Somali banks have limited direct correspondent relationships with international banks, a legacy of the de-risking of the past decade, so payments to Chinese suppliers frequently pass through traders and intermediaries in Dubai before reaching China. Each intermediary takes a share and adds time. The cost is not one of exchange rates but of distance: the number of institutions standing between a shop in Bakara and a factory in Guangzhou.

Nor is the cost only what the intermediaries charge. It is uncertainty. A payment that passes through several hands can take days to settle, and the importer does not always know which day. For a trader running a tight stock cycle, or a manufacturer waiting on inputs, that uncertainty is an expense in itself: it ties up working capital, strains relationships with suppliers and makes planning harder. Bankers marketing the yuan channel in Nairobi put it plainly, that for a finance team certainty is valuable on its own. A shorter route is a more predictable one, and predictability is precisely what Somali traders have least of.

None of this is a scandal. It is simply how an economy without direct banking links to its main supplier has to operate. But it is worth noticing that the countries around us are now shortening that chain for their own traders, and we are not.

The door Somalia has already opened

What makes this more striking is that Somalia has already shown it can open its banking sector to foreign institutions when it chooses to.

In July 2022 the Central Bank of Somalia granted licences to two foreign banks, the first allowed to operate in the country in decades. They were Banque Misr of Egypt and Ziraat Katılım, the participation banking arm of Türkiye’s Ziraat. The Central Bank described the review as a lengthy process of several months, and the then governor called them two strong banks that would add value to the development of Somalia’s financial sector.

The choice of those two reflects where Somalia’s relationships have run: deep political and commercial ties with Ankara, and old cultural and trading links with Cairo. Both banks exist to make money move more easily along those corridors.

There is no Chinese bank on that list, and as far as the public record shows, none has applied. That is the second half of this story. China is one of the largest suppliers of goods to the Somali market, and it is the partner with which Somalia signed a fisheries protocol in July opening the Chinese market to Somali wild aquatic products on duty-free terms. It has no banking presence here at all.

Why it matters more now than it did last year

Until recently, the payment question ran in one direction. Somali money went out to pay for Chinese goods. Very little came back, because Somalia sold almost nothing to China.

That is changing. From the first of May this year China extended duty-free access to goods from the fifty-three African countries with which it has diplomatic relations, Somalia among them. The July fisheries protocol gives Somali producers a specific pathway into one of the world’s largest consumer markets. If those instruments do what they are designed to do, Somali exporters will soon be receiving payments from Chinese buyers.

Those payments will arrive through the same long chain in reverse: renminbi converted into dollars and routed through correspondent banks, often through Dubai, before reaching Mogadishu. A Somali fish exporter selling to Shanghai will lose a share of the value of every shipment on the way. The trade door has been opened from the Chinese side. The payment door has not been opened from ours.

Why a dollarised economy needs this more, not less

It would be natural to assume that a country which uses the dollar as its own currency has little use for a yuan payment system. I think the opposite is true, and the reason is the most important point in this article.

Kenya, Tanzania and Rwanda each have a national currency. If access to dollar clearing became more expensive or harder to reach, their domestic economies would carry on functioning; only their international trade would be squeezed. Somalia has no such cushion. When the domestic currency is the dollar, access to dollar clearing is not only a matter of trade. It is how salaries are paid, how mobile money settles, how remittances arrive and how every shop restocks. A country in that position is more exposed to the decisions of foreign correspondent banks than any of its neighbours, and it should therefore value an additional channel more than they do, not less.

That channel becomes genuinely useful when money flows in as well as out. If Somali fish exporters selling under the July protocol are paid in renminbi, and Somali banks are able to hold renminbi balances, those balances can be used to pay Chinese suppliers directly. For that slice of trade, yuan in and yuan out, the dollar and its correspondent chain need not be involved at all. That is the mechanism by which a dollarised economy actually benefits from CIPS.

Honesty requires saying that the immediate gain for Somalia is smaller than for Kenya, because we have little yuan income today. The benefit grows only as Somali exports to China grow. But that is precisely the trajectory the tariff and fisheries arrangements were designed to start, and the payment link is cheapest to build before the volumes arrive rather than after.

A second door, not a replacement

It is important to be honest about what this would and would not change.

The yuan is not about to replace the dollar, in Somalia or anywhere else. By most estimates it accounts for only around four per cent of international payments by value, against roughly half for the dollar. Somali remittances of around two billion dollars a year arrive in dollars, the Somali economy runs on dollars, and nothing in this article suggests that should change.

Analysts at the China Global South Project, a research centre that tracks China’s engagement across the developing world, make the same point from the other side. Replacing the dollar would require Beijing to let its currency flow freely abroad, which would cost it control over its own economy, and it has no wish to do that. The aim is to offer options, not to displace the existing system. That is how the BRICS countries describe it too.

For Somalia the argument is narrower still and, I think, harder to dismiss. Somalia has learned at great cost what happens when it depends on a single channel. A decade ago, banks in the United States, Britain and Australia closed the accounts of Somali money transfer operators. Barclays moved against Dahabshiil in 2013; Merchants Bank of California exited the business in 2015. No Somali operator had been convicted of anything. The banks simply decided the compliance risk was not worth the revenue and withdrew from an entire country. Somali families found that money sent by relatives abroad could not reach them, and no institution anywhere was accountable.

A country with that history should value a second channel for its own sake. Not instead of the dollar system, which works for most of what Somalia needs, but alongside it, so that trade with one of our largest suppliers does not depend entirely on the risk appetite of correspondent banks in other capitals. Kenya, Tanzania and Rwanda have reached that conclusion. They are not abandoning the dollar. They are adding a door.

What it would take

The good news is that none of this requires anything exotic.

A Somali bank does not need to become a direct participant in CIPS to benefit from it. The system allows banks to connect indirectly, through an institution that is already a direct participant. Standard Bank, now Africa’s renminbi clearing bank with a mandate across nineteen countries, has said publicly that it intends to extend access to more African countries before the end of 2026. Somalia’s commercial banks could be asking that question now.

The Central Bank of Somalia has the other half of the answer. It ran a careful licensing process for Turkish and Egyptian banks four years ago and knows how to do it again. Whether a Chinese bank would apply is a commercial question for that bank, but a Central Bank that signalled openness, and a government that raised the matter alongside the fisheries and tariff arrangements already agreed, would at least ensure the question was being asked.

And Somalia’s own standing matters. Correspondent banks of every kind, Chinese included, assess a country’s anti-money laundering framework before they connect to it. The work Somalia has done on financial regulation since 2012 is what made the 2022 licences possible. Continuing it is what makes the next step possible.

Which arrives first

There is a quiet irony in all of this. Somalia’s markets are full of Chinese goods. Its newest trade agreement is with China. Its zero-tariff access is from China. And yet the Somali shopkeeper, the Somali importer and soon the Somali fish exporter all have to pass their money through a third country and a chain of intermediaries to deal with a partner whose goods they handle every day.

The countries around us have started to fix that. They did not do it by choosing China over anyone else. They did it by noticing that their traders were paying a cost they no longer had to pay.

So the question for Somalia is a simple one, and it is worth asking out loud. Which will arrive first: a Chinese bank in Mogadishu, or a Somali bank on the yuan system?. Given what is happening in Kigali, Nairobi and Dar es Salaam, that answer will not age well.

About the author

Abdiqani Abdullahi Ahmed is Senior Advisor for Communication and Analysis at Somalia's Ministry of Information, Culture and Tourism. He is Somalia's national focal point to the East African Kiswahili Commission, a juror for the IGAD Media Awards, and lead facilitator of the IGAD Youth Peace and Security Series. He writes here in a personal capacity.