THE Pan-African Payment and Settlement Systems (PAPSS) is expected to offer solutions to complications associated with intra-African trade transactions through a seamless backend transaction supported by African Central Banks.
Launched in June 2022, PAPPS is a centralised payment infrastructure designed to facilitate faster and more cost-effective cross-border trade transactions in local African currencies.
The payment platform, which is an initiative of Afreximbank and complements trading under the African Continental Free Trade Agreement Area (AfCTA), also minimises risk and contributes to financial integration across the regions. It has also been projected to save $5 billion in clearance and transaction costs, as reported by The ICIR.
“So, within 54 African countries and over 42 currencies, with each country having its own licensing requirements for trade routes, that is a recipe for trade transaction complications, but PAPPS is already bringing businesses together,” said a financial technology expert, Gabriel Ologunwa, who spoke in a monitored interview after the official launch of the PAPPS COWRY Conference held in Lagos.
He emphasised that breaking down trade barriers was the primary objective of PAPPS, which facilitates the instant settlement of intra-African transactions.
Commenting on how the payment initiative could dissuade centralised business transactions with dollars at the expense of intra-African trade, he said, “PAPPS works as an integrated unified marketplace, connecting every player with the ecosystem. Businesses have access to the platform.
“If a customer walks into a bank in Nigeria, with the intention to transfer N10,000 to a relative in Ghana, for 5,000 cedis. The transaction is done on the PAPPS platform, and what happens is that the customer in the Nigerian bank is debited, while the Ghanaian bank is credited on the platform in real time alongside the quoted exchange rate by the respective Central Banks,” he explained further.
According to Ologunwa,16 African Central Banks are currently on the platform, with over 160 commercial banks already boarded to offer the services to business and industrial clusters across Africa.
He explained that the platform had quotations of various African countries’ exchange rates, where countries “are allowed to quote their own rates for easier transactions.”
Apart from growing intra-African trade, the platform focuses on bringing African countries together, more closely in business dealings.
“It is estimated that as of today, $54 billion in transactions happen on the continent, and we expect that the platform will scale up such transactions. We are also moving to the era where marketers should naturally dictate the price and remove artificial scarcity of currencies,” he added.
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-African trade.
Analysts believe that the platform would ease the financial burden of traders to enable them to scale beyond their countries’ borders and tap into the AfCFTA, with a market value of $3 trillion.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, who spoke further about the platform, 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 take place within the continent.
“It is estimated that the continent would be saving about $5 billion in payment transactions costs with the adoption of the PAPSS platform,” Yusuf said.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.