Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), says the pan-African payment and settlement system (PAPSS) will simplify cross-border transactions and reduce third currencies for intra-African trade.
The third currencies include dollars, pounds and euro for cross-border transactions in Africa.
Emefiele said this on Thursday in Accra, Ghana, at the launching of PAPSS.
The Africa Export-Import Bank (Afreximbank), in collaboration with African Union (AU) and African Continental Free Trade Area (AfCFTA), officially launched the platform for commercial use.
The more efficient payment systems are, the higher the velocity of value exchange and consequently, the higher the volume and value of trade and our subsequent
Speaking at the event, Emefiele said the launch of PAPPS is a milestone reflecting collective efforts in building an infrastructure that enhances payment gateway across West Africa.
He added that the platform would benefit households, businesses, and financial institutions towards Africa’s growth as well as formalise trading activities not reflected in the official trade data.
“For example, businesses can be assured of an efficient and reliable payment gateway that supports the instant flow of funds and relatively the use of safe payment channels that usually comes at a high cost to households and businesses,” Emefiele said.
“Prior to the launch of PAPSS, settlements for intra Africa trade required a third currency and a non-African correspondent bank. This resulted in an estimated loss of close to $5 billion annually and undermined trade in Africa countries.
“The launch of PAPPS gives the fresh opportunity and aspiration for the African continent. It will simplify cross-border transactions, reduce third currencies for intra-African transactions and remove the need for correspondent Banks and ultimately amplify intra trade significantly.”
“As a percentage of total trade, intra-African trade is expected to increase to 35% from 15% in five years with infrastructure provided by PAPSS as payments and settlements are resolved.
“With the growing pace of digitisation in financial services which has been accelerated from the onset of the COVID-19 pandemic, PAPSS can serve as a viable platform for supporting e-commerce in Africa.”
The CBN governor said Nigeria is excited by the potential of PAPSS, and “that is the reason we participated actively in the programme, and we have put our best efforts to ensure the realisation of the payment platform”.
Emefiele said CBN would continue to facilitate the widespread adoption, acceptance and implementation of PAPSS.
“CBN will ensure the financial institutions under its jurisdiction accept PAPSS and recommend it to businesses across Nigeria,” he said.
Mike Ogbalu, chief executive officer of PAPSS, said the platform is a strategy towards the journey of self-reliance as a continent, thereby closing the gap in sharing borders and prosperity and also a tool to improving payments system and infrastructure.
“Our progress on this journey has as its guiding light a clear shared vision and unity of purpose. But this, like every journey, also requires critical infrastructure to accelerate the fundamental elements that will underpin a prosperous continent,” Ogalu said.
“Governments, businesses, and individuals consume goods and services — which they obtain in exchange for value. The fundamental means by which value is exchanged or traded is through payments.
“The more efficient payment systems are, the higher the velocity of value exchange and consequently, the higher the volume and value of trade and our subsequent prosperity.”
On his part, Wamkele Mene, AfCFTA secretary-general, commended the achievement of the pan-African payment and settlement system, saying it would enable Africa to reduce reliance on third currencies and boost intra-Africa trade.
PAPSS is a cross-border financial market infrastructure enabling payment transactions across Africa, bridging trade challenges in a continent with over 41 known currencies.