Kenyan traders ditching US dollar for Chinese Yuan; Kenya Bankers Association
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Rising Sino-Kenyan trade ties forces Kenyan traders to ditch US dollar for Chinese Yuan according to Kenya Bankers Association (KBA)
Rising Sino-Kenyan trade ties forces Kenyan traders to ditch US dollar for Chinese Yuan according to Kenya Bankers Association (KBA).
Kenyan traders are increasingly adopting the Chinese Yuan rather than the US dollar to settle payments when making purchases, according to information released by the Kenya Bankers Association (KBA) on Wednesday, August 2.
Rising Sino-Kenyan trade connections, according to Habil Olaka, CEO of KBA in an interview with Xinhua, was one of the primary causes of the shift.
KBA said that Yuan was emerging as an alternative currency to the US dollar in resolving financial transactions involving trade between Kenya and China due to the prevalence of Chinese projects in the country.
“What tends to happen between two countries trading, is that they use a currency that is readily available in their countries,” Olaka explained.
The second-largest economy in the world also supplies goods to wholesalers and merchants in Kenya, making the Yuan a useful settlement currency.
The KBA CEO made the revelations when he was leading the launch of the 2022 Kenyan Banking Sector Total Tax Contribution study by KBA.
Olaka claimed that most local commercial banks had a yuan trading facility that made the Chinese currency easily accessible while the nation struggles with dollar scarcity.
With trade between Beijing and Nairobi continuing to grow, KBA explained that many traders were finding the yuan as the appropriate currency for trade.
Since there is no longer a need for several currency conversions, using the Yuan dramatically lowers transaction costs compared to the past when most traders used the dollar.
In the past, many traders were using the dollar but using the Yuan, significantly reduces transaction costs since it eliminates the need for multiple conversion of currencies.
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To emphasise the rising popularity of the Chinese yuan, KBA noted that the majority of banks in Kenya had opened Chinese desks.
“This is in order to serve the growing Chinese business community in the East African country,” Olaka was quoted by Xinhua.
The popularity of the Chinese yuan started gaining pace in 2016, when former President Uhuru Kenyatta’s administration revealed it would start borrowing directly in the Chinese Yuan and other foreign currencies to reduce reliance on the dollar.
At the time, the Treasury revealed that loans from China were received in yuan, the Ministry then had to wire the money through a bank that sells it in dollars and does a similar conversion when making payments, incurring currency losses.
According to research done by Carnegie in 2022, China accounts for 16 per cent of Kenya’s total trade volume far ahead of the European Union (14 per cent), and the United States (4.5 per cent).
“In 2021, China was Kenya’s main import partner. Imports from China amounted to roughly Ksh441.4 billion,” Statista further revealed how China was becoming the country of choice for Kenyan traders.
Traders transacting with China usually import electrical machinery, spare parts, railway and trainway locomotives, iron and steel, and vehicles.
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