AfCFTA receives boost as cross-border payment system takes off
•Afreximbank President, Emefiele describe innovation as timely intervention
African Export-Import Bank (Afreximbank) and the African Continental Free Trade Area (AfCFTA) Secretariat have announced the commencement of the Pan-African Payment and Settlement System (PAPSS), a financial market infrastructure to enable instant, cross-border payments in local currencies among African markets launched two years ago.
A brainchild of the African Union (AU), PAPSS was conceived as a necessary option for accelerating regional trade as envisaged by AfCFTA.
By simplifying cross-border transactions and reducing the dependency on hard currencies for these transactions, PAPSS is set to boost intra-African trade significantly and underpin the implementation of AfCFTA, a statement by Afreximbank said.
PAPSS will serve as a continent-wide platform for the processing, clearing and settling of intra-African trade and commerce. It is expected to leverage a multilateral net settlement system.
The statement said its full implementation will save the continent more than $5 billion in payment transaction costs each year.
The platform was developed by Afreximbank, who also acts as the main settlement agent in collaboration with central banks of participating countries.
PAPSS unveiling came after a successful pilot of the countries of the West African Monetary Zone (WAMZ). The unveiling is described as an important milestone for the continent’s efforts to boost trade among African countries.
The statement disclosed that PAPSS was in advanced discussions with other national and regional institutions to rapidly expand wider connectivity.
To accelerate scalability, Afreximbank said it has approved $500 million to support the clearing and settlement in WAMZ countries. It added that an estimated $3 billion would be made available to support its continent-wide implementation.
President of Afreximbank and Chairperson of PAPSS Management Board, Prof. Benedict Oramah, said PAPSS implementation would enable Africa to leverage AfCFTA for mutual gains.
“Afreximbank is proud to have contributed to the realisation of the multi-decade dream that seemed unachievable just a few years ago. PAPSS is not positioned to replace existing regional and national payment systems but to collaborate and work with them in better integrating African economies for the benefit of all,” he said.
Secretary-General of the AfCFTA, Wamkele Mene, said: “The implementation of the Agreement establishing the AfCFTA will improve intra-Africa trade, necessitating in this regard, the establishment of a payment system to facilitate affordable and efficient cross border trade transactions. It is on this basis that the AfCFTA Secretariat strongly supports the development of PAPSS that will usher in a new phase in the African economic trajectory.
“The introduction of PAPSS provides Africa with greater capacity to conduct cross-border transactions and expand the scale of both active and latent opportunities for enhanced intra-African trade.”
Also, the Governor of the Nigerian Central Bank (CBN), said: “PAPSS has been brought about by our collective desire to facilitate and accelerate the growth of intra-African trade. With central banks working actively together alongside the Afreximbank, we are ushering in a new phase in Africa’s economic trajectory, in keeping with the ideals of the African Continental Free Trade Area.
“The introduction of PAPSS provides central banks with greater transparency and control as we now have a single window into all cross-border transactions emanating from our various jurisdictions and across the continent.”
PAPSS was launched on July 7, 2019, in Niamey, Niger, at the 12th Extraordinary Summit of the Assembly of the AU who adopted it as a key instrument for the implementation of AfCFTA.