The Challenges of Cash Use in Africa’s Cross-Border Trade and education mobility

Emmanuel Okoegwale

Founding CEO: Campteller 

Ghana’s recent announcement of a planned mobile money interoperability initiative with Nigeria marks a promising step toward enhancing cross-border trade and travel between the two countries. Positioned between Nigeria and Ghana are Togo and Benin, with Benin as Nigeria's closest neighbor and a key trading partner. Benin has also been a major destination for Nigerian students pursuing education abroad, though this has declined recently due to Nigeria’s ban on certain Beninese universities.

The Lagos–Benin Republic trade route is a major forex pressure point in Nigeria. Many Nigerian traders and students convert their local currency, the naira, into euros or U.S. dollars before traveling to Benin. This approach minimizes risk by reducing the physical volume of cash they carry, increases value, and reduces the chance of counterfeit cash exchanges when dealing with unofficial "cash-crossers" across borders. However, this age-old practice persists largely because of Nigeria's position among French-speaking neighbors with more stable currencies, which makes Nigeria an attractive source of cheaper products for nearby countries and even regions further inland.

This heavy cash usage in cross-border trade is increasingly problematic, creating substantial security and economic inefficiencies. To enable more sustainable economic growth, African nations must shift toward more transparent, efficient digital and financial solutions.

The Historical Role of Cash in Cross-Border Trade

African cross-border communities often share deep cultural, historical, and even familial ties, and many trade practices date back centuries, rooted in trust and physical cash. For these communities, cash provides a tangible, immediately verifiable value, unlike digital currency, which is often viewed as a "promise of value" that they cannot instantly verify. This is particularly relevant in rural areas where digital infrastructure is scarce, and communities rely on direct, cash-based transactions.

Over time, however, the drawbacks of cash use have become increasingly apparent. Cash transactions come with substantial costs, including handling fees, high risks of theft, and logistical challenges. For instance, even Nigerian students studying in neighboring countries rely on cash to pay tuition, as cross-border digital payment options are limited. This reliance on cash for educational expenses alone highlights the financial burden that cash dependency imposes on African families and students.

The Economic and Security Drawbacks of Cash Transactions

Cash-based cross-border trade has serious implications, including hidden costs for traders who face the logistical challenges of handling large volumes of cash. The offline nature of these transactions also reduces governmental oversight and deprives countries of tax revenues. Additionally, the need to print and transport large amounts of local currency across borders contributes to inflation and increases government expenditure on foreign exchange, which is required to facilitate currency exchanges at the border.

Given these inefficiencies, Ghana's efforts to introduce cross-border mobile money interoperability are timely. A regional digital currency system like this could be a transformative alternative to the proposed physical regional currency, the Eco, by offering a modern, adaptable solution that would simplify transactions while reducing cash dependency across West Africa.

 Addressing Infrastructure and Education Gaps for a Digital Transition

For digital payments to succeed in border communities, countries must address both infrastructure and knowledge gaps. Many border areas lack basic infrastructure like electricity, internet access, and mobile coverage, which hinders the effective use of digital payment systems. Without these basics, digital payment options are unlikely to appeal to rural traders who see no advantage over cash.

The complexity of cross-border digital transactions must also be addressed to ensure that financially inexperienced traders can navigate them easily. Simplifying digital payment processes, including currency conversions, would help traders understand and appreciate the advantages of digital systems. The cost of digital services is another barrier: if transaction fees are too high, traders are unlikely to abandon the more affordable, if risky, cash-exchange services currently in use.

Building a More Inclusive and Prosperous Future for Cross-Border Trade in Africa

The future of cross-border trade in Africa holds great potential if digital solutions are carefully and collaboratively implemented. Governments should encourage early private-sector involvement in the planning stages to create a diverse ecosystem of operators and use cases. This approach would ensure that regulation, product design, and user education meet the needs of both urban and rural traders.

If implemented effectively, countries like Nigeria could reduce the volume of cash held by informal exchangers in neighboring countries and foster more secure, traceable, and efficient trade, travel, and educational payments across borders.

A financially inclusive Africa is critical to the continent's prosperity. Transitioning from cash to digital transactions will be a vital step toward achieving a stable and interconnected African economy.