As Nigeria, other WAMZ countries begin test-run
System to reduce transaction cost by $5bn
By Yinka Kolawole, with agency report
The pilot phase of Pan African Payment and Settlement System (PAPSS) aimed at facilitating the smooth implementation African Continental Free Trade Area (AfCFTA) has commenced in Nigeria and other countries of the West African Monetary Zone (WAMZ)
The six member countries of WAMZ are Nigeria, The Gambia, Ghana, Guinea, Liberia and Sierra Leone.
PAPSS is a centralised payment and settlement market infrastructure for processing, clearing and settling of intra-African trade and commerce payments.
The Secretary-General of AfCFTA, Mr Wamkele Mene, disclosed this yesterday, in Abuja, while on an official tour to Nigeria.
Mene said that the system which would be ready at the end of 2021 was the first major step taken in addressing some challenges related to the cost of currency convertibility under AfCFTA implementation.
“We have started a piloting phase of the Pan-African payment and settlement platform of six countries in West Africa who have switched on to the platform. Transactions are already happening within these six countries that are at an advanced stage of the pilot project.
“So, the platform will make a significant contribution and our estimate is that it will reduce the cost of transactions by $5 billion annually, being the aggregate amount that is spent on currency convertibility,” he said.
Mene noted that Africa has 42 currencies and the cost of the currency convertibility was actually a constraint to intra-Africa trade. This, he said, was making trade unnecessarily expensive, thereby adding to the cost of doing business, especially the Micro, Small and Medium Enterprises (MSMEs).
“When the system is fully up and running, you will be able to transact with somebody in Kenya in Naira and they will receive Kenya shillings and Afreximbank will be the correspondent facility.
“We are not going to have a common currency overnight in Africa, we are still going to grapple with this issue of different currencies. But with the payment and settlement system we have taken the first major step in addressing some of the challenges that are related to the cost of currency,” he noted.
According to Mene, the way the six piloting countries understand the importance of the system to African economy is encouraging.
PAPSS was adopted in July 2019 by the African Union Heads of State as the payment and settlement system to support the implementation of the AfCFTA, and is expected to create new financial flows and successfully facilitate trade and other economic activities among African countries.
Afreximbank is the operator and the main settlement agent for PAPSS and expected to provide settlement guarantee on the payment system as well as overdraft facilities to all settlement agents.