By the end of this year, up to 20 countries can join the pan-African payment system.
President of the African Export-Import Bank (Afreximbank) Benedict Orama said that this financial institution expects that by the end of this year, 15 to 20 countries will be participants in the Pan-African Payment and Settlement System (PAPSS). Currently, it is known that nine countries have already signed an agreement to start commercial operations with this system.
PAPSS uses the US dollar exchange rate. At the same time, Afreximbank is currently cooperating with central banks to create another mechanism through which African countries can be provided with the opportunity to trade with each other in their currencies. Orama said that the financial institution he heads aims to introduce intra-African payments.
The growth of PAPSS from the point of view of positive prospects makes sense, which consists in reducing the number of barriers to domestic trade in Africa. Currently, there is a situation in which more than 80% of the exports of African countries are sent outside the continent.
Afreximbank will allocate $ 3 billion to clear transactions in this currency. At the same time, the report of the financial institution contains information that the lender intends to reduce the need for dollars as the scale of trade between African countries expands.
The Bank expects that the net settlement position after clearing will be zero, as a result of which there will be no need to use the dollar.
Africa’s current payment landscape is deeply fragmented. About 40 currencies are used in more than 50 countries. In addition, depending on the state, there are different preferences regarding payment methods and processing options for the same payment method.
Omoniyi Kolade, CEO of the pan-African payment company SeerBit, in October last year, during a conversation with media representatives, said that the experience of the existence of PAPSS indicates that coordination between financial institutions and cooperation at the international level is an important factor for solving the problem of a fragmented payment ecosystem.
Kolade noted that initiatives like PAPSS help optimize cross-border trade, but they need to be complemented by technologies that can be used to digitize everyday business cycles and meet the needs of groups of populations that are financially isolated and overly dependent on cash transactions.
Richard Southey, Director of digital technologies and experience at the pan-African bank Absa CIB, told reporters in November 2022 that financial institutions play a major role in the process of digitizing payments in Africa.
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