Since 1944, the US dollar has been the world’s reserve currency as a result of the Bretton Woods Agreement. This means that whenever countries engage in International trade, the currency used to facilitate payment is the dollar. Although there have been many calls since 1971 after the United States ditched the gold standard for an end of the U.S. dollar as the world’s reserve currency, no concrete decision was made until countries of the world realized that the United States has been using the dollar as a financial weapon to advance its own hegemony around the world. Whenever any country does not see eye to eye with the US, it either creates instability through military invasion such as in Iran or impose financial and economic sanctions such as in Russia and Uganda. When the United States imposed all-encompassing sanctions against Russia following that country’s invasion of neighboring Ukraine, it became obvious to world leaders that they faced the threat of the US freezing their funds whenever it liked. Thus, the call for de-dollarization began, and this time countries are not just calling for a shift from the dollar, they are also actions, and one such country that has taken a definite step is Egypt.

Recently, Egypt announced that it has officially ditched the dollar in trade and embraced trading in local currency. Well, this shouldn’t be surprising because Egypt is one of the five nations including the UAE, Saudi Arabia, Iran, and Ethiopia that accepted the invitation to join BRICS, the multipolar organization that is set to change the order of the global financial system. According to Egypt’s Ministry of Foreign Affairs, Egypt will work to urge countries it trades with to use national currencies to lessen the burden of the rising cost of utilizing foreign currencies for settlements. It also added that the decision was a result of a global economic shift. Indeed, they noted the “international crises over the past four years,” as a major development in its decision. Subsequently, it is likely the change in trade currency is rooted in similar factors that have pushed the same action in many of the BRICS nations. Egypt’s action to ditch the dollar in trade, itself with the BRICS bloc’s strategic move towards depolarization and by joining forces with BRICS, Egypt is charting a new course that deviates from the traditional economic paradigms dominated by the dollar.

Now, what does this decision mean for Egypt and Africa as a whole? Prior to making this decision, the economy of Egypt has been on the verge of collapse, easily affected by outside events like pandemics and political battles. Over 70% of the value of the Egyptian pound has been lost since the beginning of 2022, revealing how unstable the country’s finances are. This economic slowdown has led to the growth of a black market where the value of the Egyptian pound has dropped dramatically, making the country’s economic problems even worse. A big drop has happened in the central bank’s funds, which went from $44.6 billion in 2019 to $32 billion by the end of 2022. In this tough economic climate, the decision to stop using the US dollar in trade deals makes a lot of sense because it will help to protect the economy from the ups and downs of the foreign exchange markets and the scary threat of rising foreign debt. This change will likely change how Egypt’s economy works, making way for a more stable and self-sufficient banking system.

Egypt however is not the only African country that has made promising steps to ditch the dollar. After applying to join the BRICS alliance, Zimbabwe also applied for loans at the BRICS bank, New Development Bank’. The BRICS bank confirmed that they aim to start disbursing loans in local currencies to help developing countries end dependency on the US dollar. Following this announcement, Zimbabwe started to accumulate tons of gold in its Central Bank reserves in a similar fashion to that of the BRICS alliance. The reason for this is that Zimbabwe intends to back its local currency, the Zimbabwean Dollar with gold. Currently, the majority of the population in Zimbabwe uses the US dollar for daily transactions. However, with the decision to back local currency with gold, things could take a U-turn and reduce reliance on the US dollar. Zimbabwe’s move takes a leaf from the playbook of BRICS which also considers backing their yet-to-be-released currency with gold. Therefore, gold could play an important role in the functioning of BRICS, Zimbabwe, and other developing countries.

Just like Egypt and Zimbabwe, Nigeria is also looking towards strengthening its local currency which has gotten weaker against the dollar in recent months. According to the Senior Advocate of Nigeria, Femi Falana, one way to strengthen the dollar is for the Federal Government to follow BRICS ideals of de-dollarization and sell crude oil in local currency Naira and not the US dollar. The State-advocate called on the government to ignore predictions made by the International Monetary Fund (IMF) and the World Bank and begin working alongside BRICS theology to strengthen Nigeria’s native economy and local currencies. He added that Nigeria must join BRICS and begin selling oil in local currency Naira and not the US dollar. This way Naira will be in demand and the demand will boost the value of naira.

The fact is following what happened to Russia, every BRICS country and developing countries exists with a fear of imposed Western sanctions. Imagine that the United States and its allies froze about $300 billion belonging to Russia’s central bank’s foreign currency reserves and severely limited Russia’s access to the SWIFT payment system. Similar measures have also been taken against other countries including Afghanistan, Iran, and Venezuela. The threat of the US has pushed countries to come together and find a way to limit the hegemony of America. It’s why Iran and Russia have already started trading in their national currencies after Tehran first decided to reduce the use of the dollar in its foreign trade and for the first time, Saudi Arabia and China have also discussed pricing oil deals in the Chinese yuan instead of the dollar. Moreover, the United States economy and rising debt are not the most calming statistics for countries that rely on the currency. Therefore, the transition to local currency dependence is the best route for all emerging countries and global economic health.

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