Africa begins PAPSS for cross border transactions

In a groundbreaking move for African trade, the African Export-Import Bank and the African Continental Free Trade Area (AfCFTA) Secretariat have unveiled the Pan-African Payment and Settlement System (PAPSS). This innovative financial market infrastructure is set to streamline and revolutionize cross-border transactions by enabling instant payments in local currencies between African markets. Mike Ogbalu, the CEO of PAPSS, recently sat down with CNBC Africa to discuss the transformative impact of this initiative. Ogbalu highlighted the fundamental role that PAPSS will play in reshaping trade dynamics on the continent. With aims to significantly lower transaction costs, expedite payment processing with instant transfers, and boost intra-African trade, PAPSS serves as a critical pillar of the overall AfCFTA goals. Currently, only 17 to 18 percent of trade in Africa occurs between African countries, emphasizing the need for an efficient payment system to foster increased trade among nations. The PAPSS system functions through a collaborative effort with African central banks, ensuring robust governance and operational structures. Traders looking to make cross-border payments can now initiate transactions through banks or financial service providers in their local currencies, thus eliminating the need for foreign exchange conversions. The network of central banks manages settlement processes, ensuring seamless and swift transfer of funds between parties. Moreover, PAPSS is designed to accommodate transactions of varying values, with limits and qualifications determined in partnership with central banks. The system's regulatory framework, overseen by a governing council comprised of central bank representatives, emphasizes the collaborative nature of this financial infrastructure. During the pilot phase, PAPSS has successfully connected six central banks in the West African Monetary Zone, including Nigeria, Ghana, Guinea, Gambia, Sierra Leone, and Liberia, facilitating efficient transactions across borders. While the system is currently operational in these select countries, efforts are underway to integrate with national switches in other regions and expand connectivity to commercial banks across Africa. Ogbalu emphasized that the core settlement infrastructure of PAPSS is fully operational, with transactions already in progress between participating central banks. As further integration with national switches and commercial banks progresses, the accessibility of PAPSS will increase, offering more touchpoints for users seeking to leverage this groundbreaking payment system. Reflecting on the pivotal role of the African Export-Import Bank in realizing the vision of PAPSS, Ogbalu underscored the institution's longstanding commitment to fostering intra-African trade. With foundations laid as far back as 1994, the establishment agreement of the African Export-Import Bank articulated the goal of implementing robust payment arrangements to support intra-African trade, a vision that has now materialized in the form of PAPSS. The endorsement of PAPSS by African heads of state further illustrates the continent's dedication to enhancing trade mechanisms and promoting economic growth through innovative financial infrastructure. By creating a unified platform for seamless cross-border transactions, PAPSS is poised to catalyze a new era of economic cooperation and prosperity across Africa.