Africa’s economies are once again at the center of global trade discussions, but not for the reasons most would hope. According to the recently released African Trade Report 2025 by Afreximbank, the continent faces a staggering trade finance gap of over $100 billion annually—a persistent structural constraint that threatens to undermine Africa’s industrial ambitions, job creation efforts, and its long-term economic sovereignty.
Afreximbank notes that the problem is not merely one of numbers but of design. “The gap reflects regulatory mismatches, sovereign credit rating biases, and limited access to affordable capital,” the report states. These systemic issues are compounded by global regulatory changes like Basel IV, which make it harder for local financial institutions to extend trade finance to small and medium-sized enterprises (SMEs) across Africa.
Despite being home to 1.3 billion people and a combined GDP exceeding $3.1 trillion, the continent still relies heavily on foreign-denominated trade finance flows. This leaves African exporters and importers exposed to exchange rate volatility and subject to credit constraints beyond their control.
In response to these challenges, Afreximbank is leading a continental push for African-led trade finance solutions. Central to this strategy is the Pan-African Payment and Settlement System (PAPSS), which facilitates intra-African trade in local currencies, significantly reducing dependence on external clearing systems like SWIFT and correspondent banks.
“PAPSS is a game changer,” said a representative from the bank at the 32nd Annual Meetings held in Abuja, Nigeria. “It directly addresses the liquidity and settlement risks that hinder intra-African trade and investment.”
Complementing PAPSS is the growing momentum behind the African Continental Free Trade Area (AfCFTA), now ratified by 48 countries. The report praises AfCFTA for establishing a harmonized trade environment but emphasizes that without access to finance, many African businesses will struggle to leverage its full benefits.
Notably, South Africa and Nigeria have already begun transactions under AfCFTA protocols, showing early signs of the agreement’s transformative potential. But Afreximbank cautions that more needs to be done to scale local development finance institutions (DFIs) and improve access to trade insurance and credit enhancement services.
The bank also points to other innovative instruments it has developed, such as the Intra-African Trade Fair (IATF)platform and the MANSA repository, a centralized Know-Your-Customer (KYC) database designed to streamline regulatory compliance for African businesses.
Further exacerbating the trade finance dilemma is the uneven regional development of financial infrastructure. The report highlights a sharp divide between Southern and Western Africa—home to stronger financial institutions—and other regions still battling with liquidity constraints and institutional weaknesses. In fact, Southern Africa leads intra-African trade, largely because of more advanced access to finance and robust public-private partnerships.
To close the trade finance gap, Afreximbank recommends a multi-pronged strategy:
- Scaling Regional DFIs – Encourage African countries to capitalize regional financial institutions capable of extending affordable trade finance.
- Strengthening Local Currency Frameworks – Increase the use of local currencies in cross-border trade to reduce dollar dependency.
- Leveraging Technology – Adopt blockchain and AI-powered tools to streamline credit assessment and trade documentation.
- Reforming Global Ratings and Risk Models – Engage with global institutions to adjust credit rating systems that currently disadvantage African borrowers.
The African Trade Report 2025 warns that if the continent does not take decisive action, the trade finance gap will continue to widen—further marginalizing African producers in global value chains and undermining the goals of Agenda 2063.
But the mood at Afreximbank’s Annual General Meetings was far from pessimistic. With tools like PAPSS, AfCFTA, and dedicated health and digital infrastructure investments, Afreximbank is demonstrating how African-led institutions can close this gap and create resilient economic ecosystems that thrive independently of external shocks.
As global markets fragment and multilateralism evolves, Africa’s ability to finance its own trade may well determine its place in the next chapter of global commerce.
Source
African Trade Report 2025 – Afreximbank. Download Report
