Vice President Mahamudu Bawumia on Thursday launched commercial operations of Pan-African Payment and Settlement System (PAPSS) and charged Governors of African Central Banks to connect their national payment switches to PAPSS.
PAPSS is a cross-border financial market infrastructure instantly connecting payment transactions across Africa and its implementation would save Africa five billions dollars annually in cost of payment transactions.
It is designed to enable leading-edge technology African banks, payment service providers and other financial market infrastructure to make instant and secure payments between African countries.
The system was designed and facilitated by the Africa Export-Import Bank (Afreximbank), the African Union Commission and the African Continental Free Trade Area (AfCFTA) Secretariat, as well as the Central Banks in Africa.
It allows for instant payments by both originators and recipients to transfer and receive cash in their local currencies anywhere in Africa.
Vice President Bawumia, delivering the keynote address at the launch of PAPSS in Accra on the theme, ” Connecting Payments, Accelerating Africa’s Trade,” said the successful implementation of PAPSS would enhance intra-African trade and ensure efficient and transparent payment system.
It would simplify the historical complexities and costs of making payments across Africa’s borders and provide operational efficiencies that open up vast economic opportunities for African economies.
The event attracted high profile personalities across the continent including the former President of Niger and AfCFTA Champion, President Mahamadou Issoufou, Olusegun Obasanjo, former President of Nigeria and Chairman of the Intra-African Trade Fair Advisory Council,
Mr Wamkele Mene, the Secretary-General of AfCFTA, Mr Mike Ogbalu, the Chief Executive Officer of PAPSS, Professor Benedict Oramah, the President of Afreximbank, representative of the President of African Union, representatives of heads of state, CEOs of banks and governors of African central banks and captains of industry.
Vice President Bawumia noted that PAPSS was expected to benefit all stakeholders from governments, banks and payment providers to the end customers, corporates, small enterprises and individuals.
The speed, simplicity and security of the PAPSS process would greatly improve the capabilities of the participating countries, increasing access to new African markets with less costly foreign exchange complications, he stated.
He observed that with 55 African countries having 42 currencies and four exchange rate systems characterised by lack of currency convertability and ill-liquidity, which often discouraged intra-African trade.
The African Union’s annual trade report for 2020 indicates an average of 13 per cent intra-Africa import and 20 percent intra-Africa export over the past seven years.
The Vice President believed that with the rolling out of PAPSS, governments and African central banks would witness less pressure on foreign exchange liquidity and greater transparency of cross-border transactions, increase potential to generate revenue, as well as ease customers’ burden and enhance trade facilitation.
“As you are all aware, the underlying motive behind our integration scheme is the expectation that, through collaborative efforts, participating countries in the integration programmes would generate maximum socio-economic benefits for their citizens in the sub-region.
“Regional integration, undoubtedly is an efficient tool for overcoming the constraints imposed by the nature and size of individual national markets,” Dr Bawumia stated.
He observed that if production of goods and services were carried out in an enlarged regional economic space, there was a greater chance of achieving substantial economic benefit.
Dr Bawumia noted that over the years, there had been tremendous emphasis by central banks in Africa to develop domestic payments systems such as such as Real-Time Gross Settlement (RTGs), Automated Clearing House (ACH), Securities Settlement System (SSS), Automated Check Processing System and a National Switch, etc.
However, he said, there had been less focus on cross border or intra African payments.
Notwithstanding their significance, he observed that intra-African payments faced various challenges including cost, access, speed and transparency.
“On a related note, we have also witnessed the negative effects of the Covid-19 pandemic on the economies across the globe and more especially on the African economies.
“The pandemic continues to reverse some of the economic gains we have achieved and also brought to the fore sustainability of some of these interventions.
“Trade has also been impacted through disruption to supply chains of imports and exports of goods and services. The good news however is that we have seen increased consumer preference for digital payments which we have to sustain for intra African trade,” the Vice President stated.
Dr Bawumia stated the AfCFTA had been given the mandate of promoting intra-regional trade.
The fulfilment of which required, he said, the support of all African central banks as supervisors of the payment systems to ensure seamless transfer of funds across the continent.
“It is in this regard, that I applaud the AfCFTA and Afreximbank for initiating the pan-African payment and settlement (PAPSS).
“And I am sure you will agree with me that with the launch of the PAPSS, the building blocks of the AfCFTA are progressively falling into place.
The 12th Extraordinary Summit of the Assembly of the African Union (AU) on July 7, 2019 in Niamey, the Republic of Niger, as one of the operating instruments of the AfCFTA as an instrument to boost intra-African trade, stimulate industrialisation and promote sustainable and inclusive economic growth in Africa.