You can route through your pair. Say A has a channel with B, B has a channel with C and C has a channel with D, you can make payment between A and D provided that B and C are online. In a way that nobody can steal money from one another, and neither B not D know who is paying who. In practice, B and C would probably be like banks or exchanges, with many channels, while normal users only need one channel open.

True, and in fact lightning payments tend to take many hops if routed publically.

But every citizen would still need atleast one lightning channel. And opening those is expensive.

The lightning channel would go through a custodial wallet. Yes, people could self host their own wallets, but fees would be higher because they'd have to open a lightning channel.

So you need something centralized for it to actually work.

No, why? It's all P2P.