Why African Nations Must Trade More With Each Other

Kenya, 28 October 2025 - The world economy is changing faster than many expected.

Trade wars, oil prices, currency shifts, and the ongoing technological race are reshaping how nations do business, and Africa, especially Kenya, sits right in the middle of these shifts.

From global trade deals to commodity price swings and currency fluctuations, the ripple effects are touching everything, from the price of tea in Kericho to the cost of fuel in Kisumu.

The story of the global economy is no longer about faraway boardrooms. It’s about how global events shape the lives and livelihoods of millions across Africa.

The New Shape of Global Trade

Over the past two years, global trade maps have been redrawn. The rivalry between the U.S. and China, Europe’s reindustrialisation, and the post-pandemic realignment of supply chains have forced countries to rethink who they trade with and how.

Africa’s answer has been bold: the African Continental Free Trade Area (AfCFTA), a pact linking 54 countries into one large market.

If properly implemented, it could create a $3.4 trillion economic bloc and boost intra-African trade by more than 50% within a decade, according to the African Export-Import Bank (Afreximbank).

In East Africa, Kenya is already feeling this shift. The country recently signed trade agreements with the European Union (EU) and Indonesia, aimed at opening new markets for agricultural exports and industrial goods.

“Africa cannot afford to stay on the margins of global trade,” said Prof Benedict Oramah, the then President of Afreximbank, during the 2025 Trade and Investment Forum.

“The world is shifting, and African nations must trade more with each other, and negotiate as a bloc globally.”

Prof Oramah is the outgoing President and Chairman of the Board of Directors, Afreximbank and his position has been taken over by George Elombi, who started his tenure on 24 October 2025.

But progress has been slow. Bureaucratic delays, poor infrastructure, and overlapping regional blocs have made it difficult for many African exporters to benefit fully from AfCFTA. Kenya, for instance, still exports primarily to a handful of countries, with tea, coffee, and flowers making up the bulk of its earnings.

When one of those markets sneezes, Kenya catches a cold. This year, Pakistan’s reduced tea imports led to a sharp fall in Kenya’s tea earnings, the first in seven years, proving how dependent local livelihoods are on global demand swings.

Market Shocks: Oil and Gold Driving Global Waves

Oil and gold remain two of the most influential commodities shaping the global economy, and by extension, African fortunes.

In 2025, oil prices have been unpredictable, oscillating between $75 and $95 a barrel as OPEC+ supply cuts, geopolitical tensions in the Middle East, and demand fluctuations in Asia keep markets on edge.

For Africa’s oil importers, including Kenya, Uganda, and Rwanda, high prices mean higher transport and electricity costs. It’s a blow that quickly trickles down to consumers, pushing up food prices and inflation.

“Energy prices have been a major inflation driver across Africa,” said Dr Ngozi Okonjo-Iweala, Director-General of the World Trade Organisation, in a recent Bloomberg interview.

“They feed into everything, from food to manufacturing, making it harder for households to cope.”

Meanwhile, gold has been on a different kind of run, a “safe-haven surge.”

Investors spooked by global uncertainty, rising debt, and market volatility have driven prices to near-record highs, crossing $2,400 per ounce in some sessions.

That’s great news for African producers like South Africa, Ghana, and Sudan, but it’s a mixed blessing. While national reserves grow, the boom has also fuelled illegal mining, environmental damage, and exploitation in informal gold-mining regions across the continent.

The Dollar Effect: Stronger Currency, Weaker Margins

The global economy has also been shaped by one simple but powerful fact: the U.S. dollar is strong again.

The dollar’s strength, driven by high U.S. interest rates and investor caution, has made imports more expensive for developing countries while reducing export competitiveness. Kenya’s shilling, which briefly stabilised in mid-2025, remains under pressure from a widening trade deficit and falling export receipts.

According to the Central Bank of Kenya (CBK), the shilling averaged KSh 129 per U.S. dollar in the last quarter, stronger than last year’s KSh 144, but still volatile.

While this gives temporary relief to importers, exporters lose out as they earn fewer shillings per dollar.

“Kenya’s balance of payments remains fragile,” said Dr Sarah Ochieng, a Nairobi-based economist.

“A stronger currency can hurt exporters, while a weaker one raises import costs; the challenge is maintaining balance.”

Inflation, Debt, and Fiscal Stress

For many African economies, the global financial ripple is hitting home through inflation and debt stress.

In Kenya, inflation has hovered around 6.3%, kept alive by energy and food prices. Public debt now stands above Sh 11 trillion, much of it owed in foreign currency. That makes Kenya highly sensitive to dollar strength; every uptick means more expensive repayments.

According to the IMF’s October 2025 World Economic Outlook, Sub-Saharan Africa’s external debt service payments will rise by nearly 18% in 2026, as countries grapple with depreciating currencies and higher global interest rates.

For citizens, that translates to more taxes, delayed projects, and tighter budgets at both county and household levels.

Africa’s Window of Opportunity

Despite the turbulence, analysts say Africa stands at a strategic turning point. Its population of 1.4 billion, young, tech-savvy, and increasingly urban, represents both a challenge and an opportunity.

The continent holds 60% of the world’s uncultivated arable land and vast mineral resources that are crucial for clean energy transitions, from lithium and cobalt to rare earth elements. With the right trade strategy, Africa could be more than just a supplier of raw materials.

“Africa can’t be a spectator in the new economic order,” said Dr Vera Songwe, former head of the UN Economic Commission for Africa.

“We must move from exporting raw commodities to building industries that create jobs at home.”

Countries like Kenya are already pushing in that direction, positioning themselves as regional manufacturing and digital service hubs, investing in infrastructure, and diversifying export markets beyond traditional partners.

What Kenya Must Do Next

Kenya’s economy sits at a crossroads of opportunity and risk. Here’s what experts say should happen next:

1.     Diversify export markets. Reduce dependence on a few buyers like Pakistan for tea or the EU for flowers. New trade deals in Asia and within Africa can stabilise income.

2.     Build fiscal resilience. Strengthen foreign reserves and improve tax collection to cushion shocks from volatile markets.

3.     Support local value chains. Encourage agro-processing, manufacturing, and innovation to move away from raw exports.

4.     Balance the books. Limit borrowing for recurrent expenditure and prioritise long-term projects that generate jobs and exports.

The Bottom Line

The forces shaping the global economy, trade realignments, market volatility, and shifting currencies, are not distant headlines. They’re deeply felt across Africa, from the coffee estates of Nyeri to the ports of Mombasa.

Kenya, like much of Africa, faces a tough balancing act: staying globally connected while building local resilience. But if it plays its cards right, leveraging trade, technology, and smart policy, the country could turn global uncertainty into a new era of opportunity.

In the words of Dr Songwe, “Africa’s time is not tomorrow. It’s now. But only if we build our economies for the world as it is, not the world as it was.”