PAPSS: A crucial payment system for the African market, By Lanre-Peter Elufisan

The implementation of PAPSS will help Africa become a market open to the movement of goods and people, through improved financial transactions. As the continent forges ahead on the AfCFTA, a critical economic integration project, resolving payment and settlement bottlenecks will help African currencies retain value. Finally, PAPSS will also serve as a verifiable platform for supporting business-to-business eCommerce within Africa.

In the area of cross-border payments, progress is being made. In January, the African Export-Import Bank introduced the novel Pan-African Payment and Settlement System , which is a centralised cross-border financial system created to enable payment transactions across the continent. By reducing costs, making transactions quicker, and decreasing liquidity requirements of commercial and central banks, PAPSS has enormous potentials to boost the efficiency of cross-border trade across Africa.

Over 80 per cent of the transactions sent from Africa are processed in the United States but have their recipients in other regions. The Asia-Pacific and Europe regions account for a combined 52 per cent of where the payments are eventually transferred, compared to only 17 per cent for Africa. This shows the intermediation role of U.S. dollar clearing banks. And, according to Godwin Emefiele of the Central Bank of Nigeria, the reliance on these third-party currencies, like the U.S.

…the PAPSS system processes settlements within 24 hours across all participating central banks at the same time. In simple terms, throughout the day a bank accumulates credits and debits, meaning that it will simultaneously owe and be owed money. The PAPSS system makes sure that at the end of the day, the payments are settled, and banks have enough cash to operate.

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