Africa: Afreximbank Expects Up to 20 Countries to Use Pan-African Payment System by Year’s End

As many as 20 countries may be part of a pan-African payment system by the end of the year.

African Export-Import Bank (Afreximbank) President Benedict Oramah said the bank expects the Pan-African Payment and Settlement System (PAPSS) to have between 15 and 20 countries participating by that time, the Financial Times (FT) reported Sunday (June 18, 2023).

So far, nine countries have signed up to start commercial operations with PAPSS, according to the report.

PAPSS currently uses U.S. dollar exchange rates, but Afreximbank is working with central banks to develop another mechanism that would allow trade among African nations in their own currencies, the report said.

“What we are doing is to domesticate intra-African payments,” Oramah told the FT.

The growth of PAPSS aims to reduce barriers to internal trade on the continent at a time when less than one-fifth of Africans’ exports go to another country within the region, with the remainder going outside the continent, according to the report.

Afreximbank is budgeting $3 billion to clear trades in dollars but the bank aims to reduce the need for dollars as more trade happens among countries in Africa, the report said.

The bank’s hope is that “the net settlement position after clearing should turn to zero, so that there will be no need to pay any dollar to anybody,” Oramah told the FT.

The African payment landscape is deeply fragmented, with some 40 currencies across 54 countries, divergent preferences for payment methods, and different ways of processing the same payment method in different countries.

PAPSS shows that interbank rails and international cooperation are critical to solving the problem of this fragmented payment ecosystem, Omoniyi Kolade, CEO at pan-African payment company SeerBit, said in an interview posted in October 2022.

Kolade added that while initiatives like PAPSS are helping to streamline cross-border trade, they need to be complemented by technologies that digitize everyday business cycles and address the needs of financially excluded populations that are overly reliant on cash transactions.

Financial institutions are at the forefront of efforts to digitize African payments, Richard Southey, chief digital and experience officer at pan-African bank Absa CIB, said in an interview posted in November 2022.