MANY African countries carrying out financial transactions now have a better alternative with the recently launched Pan African Payment Systems Platforms (PAPPS), analysts told The ICIR.
PAPPS- an initiative of the Afreximbank – has also been projected to save $5bn in clearance and transaction costs.
With the coming into force of the African Continent Free Trade Area Agreement (AfCTA), the payment platform is established to address concerns of intra-African trade payments
The payment systems platform, analysts say, will facilitate trade beyond borders without resorting to dollar as an intermediary currency.
“It is about a payment system that would be less burdensome to traders seeking to transact from Congo to Nigeria without seeking an intermediary currency such as the dollar, which often comes with a cost.”
Economist and the CEO of Global Analytics Consulting Limited Tope Fasua told The ICIR.
Fasua explained further that the idea behind the payment system was to serve as a guarantee, like an intermediary, to make payment systems easier at minimal costs.
“It’s essentially to boost intra-African trade. The point is seemless exchange of currencies, wherein goods are the underlining assets being traded,” he said.
He further explained that since exchange of goods was the underlining trading assets, it could to be a hedge against inflationary pressures.
Findings show that the new pan-African payment system removes legacy complexities, including the cost of cross-border payments, bolsters operational efficiencies and sets a new path to more stable and stronger African currencies. It is believed to spur intra-Africa trade.
Analysts knowledgeable about the payment system told The ICIR that the the small and medium enterprises (SMEs) would be the biggest beneficiaries of the projected $5 billion in savings on clearance and transactional costs annually, as more people begin to use the continent’s new cross-border payment platform.
They also insisted that the savings would enable small businesses to unlock billions of dollars. They added that the platform would ease the financial burden of traders to enable them scale beyond their countries’ borders to tap into the AfCFTA with a market value of $3 trillion.
“The commercial launch marks a significant milestone in connecting African markets seamlessly. It will provide a fresh impetus for businesses to scale more easily across Africa and is likely to save the continent more than $5 billion in transactions costs every year,” said Chief Executive Officer of PAPSS Mike Ogbalu.
Giving further insight on the development, the Chief Executive Office of the Centre for the Promotion of Private Enterprise, (CPPE) Muda Yusuf told The ICIR that PAPSS was a major positive development for trade facilitation on the African continent, especially in the context of AFCFTA.
Yusuf said the payment settlements would now take place within the continent.
“It is estimated that the continent would be saving about $5 billion in payments transactions cost with the adoption of the PAPSS platform.
“It is thus bringing a significant value to the African Continental Free Trade Area. An efficient and seamless payments system is necessary for the acceleration of the economic integration process.”
He stressed that ECOWAS common currency agenda would complement the AFREXIM initiative.
“However, countries on the continent need to ensure good macroeconomic management so that there is a convergence of key macroeconomic variables and stability of their macroeconomic environment.”
Recall the Governor of the Central Bank of Nigeria (CBN) Godwin Emefiele had, at the launch of PAPSS in Ghana earlier in the year, assured that the financial institutions under its jurisdiction would accept the PAPSS and recommend it to businesses across Nigeria.
Emefiele described PAPSS as a breakthrough achievement for the continent, saying it would help facilitate trade and enhance payment gateways across West Africa.
“CBN will ensure the financial institutions under its jurisdiction accept PAPSS and recommend it to businesses across Nigeria.”