By Bassey Udo
In anticipation of the take-off of the African Continental Free Trade Area (AfCFTA), the African Export-Import Bank (AFREXIMBANK) says the new pan-African Payment and Settlement System (PAPSS) to facilitate transactions within the continent.
The President and Chairman of the Board of Directors of the Bank, Benedict Oramah, who spoke at the formal roll out of the new continental payment platform in Accra, Ghana, said PAPSS would effectively eliminate Africa’s financial borders, formalise and integrate Africa’s payment systems, and accelerate the huge AfCFTA-induced growth curve in intra-African trade.
Oramah said the bank was eager to build upon the AfCFTA’s creation of a single market throughout Africa to help achieve the goals of intra-African trade.
PAPSS, Oramah said, would provide the state-of-the-art financial market infrastructure connecting African markets to each other, thereby enabling instant cross-border payments in respective local African currencies for cross-border trade.
With AFREXIMBANK as the main Settlement Agent for PAPSS, he said the bank would provide settlement guarantees on the payment system and overdraft facilities to all settlement agents, in partnership with Africa’s participating Central Banks.
“PAPSS will effectively eliminate Africa’s financial borders, formalise and integrate Africa’s payment systems, and play a major role in facilitating and accelerating the huge AfCFTA-induced growth curve in intra-African trade,” Oramah
The Ghana President, Nana Akufo-Addo, who performed the ceremony in Accra said apart from saving Africa over $5 billion annually in payment transaction costs, the new platform would accelerate the continent’s transactions relating to the operations of AfCFTA.
Commending AFREXIMBANK and AfCFTA Secretariat for the establishment of the payment system, President Akufo-Addo said PAPSS was a major leap in releasing the continent from overdependence on external players and factors to accelerate intra-continental trade and investment.
“This launch is a result of many months of hard work, resolve and commitment towards achieving set objectives for the growth of the continent in trade. All Central Banks in Africa must now join up and ensure seamless transfer of funds, by deploying this most practical and important African solution to an African problem,” Akufo-Addo said.
PAPSS, developed by African Export-Import Bank (AFREXIMBANK), he said, would boost intra-African trade by transforming and facilitating payments, clearing and settlement for cross-border trade across Africa.
The PAPSS launch event was graced by the presence of Chief Olusegun Obasanjo, former President of Nigeria and Chairman of the IAFTA Advisory Council, and Mahamadou Issoufou – former President of Niger Republic, who lauded the vision and determination of African leaders in establishing the world’s largest free trade area. Issoufou is acknowledged as a champion in driving the establishment of the AfCTA Initiative.
Secretary General AfCFTA Secretariat, Wamkele Mene; Governor of Nigeria’s Central Bank and Chairman PAPSS Governing Council, Godwin Emefiele, made presentations at the launch witnessed by representatives of the Presidents of Egypt and Uganda and Chair of African Union Commission (AUC) represented by the Democratic Republic of Congo President.
In their respective congratulatory messages, they pledged support for the PAPSS, describing it as a potential game-changer in Africa’s economic destiny.
PAPSS CEO, Mike Ogbalu said the payment system was not designed to compete with or replace existing payment systems, but to facilitate the connectivity level that would bring all payments systems together into one network that is interoperable, efficient and affordable.
“PAPSS is designed to make our currencies regain value to domesticate intra-Africa payments in this journey towards African prosperity, while providing the superhighway which connects others to reach every part of this continent as we seek to create the Africa that We Want,” Ogbalu said.
On his part, the AfCFTA Secretary General, Wamkele Mene acknowledged the role and commitment of the Continent’s Heads of States and Governments through the African Union, saying their strong political will would continue to be the bedrock of progress towards a full implementation of AfCFTA that has now been strongly boosted with the commercial launch of the PAPSS.
PAPSS, AFREXIMBANK said, would provide the solution to the disconnected and fragmented nature of payment and settlement systems that have long impeded intra-African trade.
Prior to PAPSS, over 80 percent of African cross-border payment transactions originating from African banks were routed offshore for clearing and settlement using international banking relationships.
That arrangement posed multiple impediments to smooth financial transactions in Africa, ranging from payment delays to operational inefficiencies and compliance concerns for the disparate regional payment systems.
PAPSS, which has been successfully piloted in the six countries of the West African Monetary Zone, would deliver multiple advantages and efficiencies to intra-African trade payments. These include reducing the cost, duration and time variability of cross-border payments across Africa; decreasing the liquidity requirements of commercial banks for cross-border payments, and strengthening oversight of cross-border payment systems by central banks.
Also, PAPSS would deliver harmonisation across the continent through its comprehensive legal, regulatory and operational framework, comprising standardised rules, formats and governance arrangements, harmonised Know-Your-Customer and Anti-Money Laundering procedures, payment confirmation and settlement finality.
A precondition for participation in PAPSS is compliance with its set rules and standards, AFREXIMBANK said.