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Banco de Fomento Angola is joining China's Cross-Border Interbank Payment System to meet customer demand for direct yuan settlement, a source at Angola's second-largest commercial lender told Reuters.
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Demand for direct settlement of local currencies into yuan has been rising in Africa as trade and investment links with China expand and Beijing pushes to internationalise its currency, prompting banks to develop the infrastructure needed.
"We have realised, through our clients, that financial flows with China will have to switch to the CIPS system," the source said, adding: "If we remain on the sidelines, we may even lose this relationship with our Chinese clients".
China is a key economic partner for Angola, purchasing much of its crude oil and providing billions of dollars in financing.
BFA will be the first Angolan bank to join CIPS and plans to complete the process by next year, the source added.
While the dollar remains dominant in global trade and reserves, growing commerce with China has encouraged some African governments, firms and banks to expand their yuan use.
ANGOLA EMBRACES YUAN
Earlier this month, Angola's central bank added the yuan to the currencies that commercial banks can use to meet hard currency reserve requirements, giving it the same status as the US dollar, the euro and the South African rand.
On Monday, the head of debt management at Angola's finance ministry, Dorivaldo Teixeira, said the government is working on a plan to secure yuan-denominated debt financing to benefit from low interest rates.
The moves support BFA's decision to join CIPS, the source said, adding that international factors were also key.
"Previously, we did not see any demand for yuan from suppliers or customers in China, as they preferred to hold US dollars," the source said.
"These changes are linked to the direction of international trade, shifts in the geopolitical landscape and new trends."
South Africa's Standard Bank, which became the first African lender to connect to CIPS in November, secured authorisation to clear yuan across the continent last month, jointly with Industrial and Commercial Bank of China.
Reuters
