CIBN, partners advocate PAPSS adoption for Africa’s $3trn market

By Grace Alegba

The Chartered Institute of Bankers of Nigeria (CIBN) says adoption of cross-border payment systems will boost trade and fast-track projected three trillion dollars borderless market needed to reverse poverty in Africa.

Mr Ken Opara, President, CIBN, said this on Thursday in Lagos at a road show organised by
Pan African Payment and Settlement System (PAPSS) in collaboration with CIBN and the National Action Committee on AfCFTA (NAC-ACFTA).

Opara said that easy cross-border payment system across Africa would accelerate economic growth, foster healthy business relationships, and support the realisation of AfCFTA objectives

The theme of the event is “PAPSS: Enabling Seamless Cross Border Payments Among African Countries and Regions”.

The event was held to engage commercial banks and traders in Nigeria.

Opara said inter and intra trade volumes in the African continent were low because of cumbersome transborder payment procedures, adding that PAPSS would close the gap since Africa did not have common currency.

Opara, also the Chairman of Council, said that between January and October 2023, intra-African trade accounted for only 18 per cent of Africa’s total exports and 15 per cent of its total imports.

He said initiatives like PAPSS were needed in facilitating smoother cross-border transactions and further enhancing regional trade integration.

“Presently, intra-Africa trade stands low at just 14.4 per cent of total African exports. According to UNCTAD, the AfCFTA could boost intra Africa trade by about 33 per cent and cut the continent’s trade deficit by 51 per cent

“In the same vein, the projected $3 trillion borderless market could be instrumental in reversing current trends in poverty, inequality and growth on the continent, as well as help place Africa on an inclusive and sustainable growth path.

“At the forefront of facilitating the achievements of the objectives of AfCFTA is the Pan-African Payment & Settlement System (PAPSS), developed by Afrexim Bank and the African Union, as an instrumental force in propelling the economic and financial integration of the African continent,” he said.

He said over 80 per cent of intra-African payments currently go through either Europe or the United States, a process Afreximbank estimates costs as much as 5 billion dollars in fees and compliance costs.

“The PAPSS roadshow is to showcase the outstanding achievement of the African Export Import (Afrexim) Bank in revolutionising the trade payment system across Africa.

“As we all may already know, the PAPSS platform enables the efficient flow of money securely across African countries, the benefits of which include faster and cheaper payments across Africa, reduced foreign exchange strain and ultimately the potential for faster economic growth across the continent.

“Indeed, as the PAPSS platform kicks in, we expect a disruption in how Africans do business, develop products and trade,” he said.

Opara gave regulatory explanations why the official launch of PAPSS for public use was on January 13, 2022, and the roadshow on sensitization was commencing two years later.

He said that although African nations were already enthusiastically embracing instant payment methods and digital wallets, there was room for growth in intra-African trade.

He explained that Nigeria’s cash transactions plummeted from 95 per cent in 2019 to 80 per cent in 2022, while instant payments surged fourfold to encompass 8 per cent of all transactions.

He said the shift marked progress towards a less cash-dependent economy, aligning with the global trend of diminishing cash usage.

“Furthermore, a recent survey covering businesses in Nigeria, Ghana, Kenya, and South Africa revealed that 61% engage in cross-border payments, with nearly half using local banks.

He described AfCFTA as the game changer expected to create a tariff-free continent capable of boosting intra-African trade and investment, growing local businesses, rev up industrialisation and creating jobs for the bulging youth population.

Mr Mike Ogbalu III, CEO of Pan-African Payment Settlement System (PAPSS), who joined the meeting, virtually explained the critical role the CBN played in removing restrictions that would have hindered the payment platform.

He said the PAPSS already had 45 active banks and the platform had objectives to boost the nation’s GDP and create 11 million jobs within 10 years.

He said Nigerian banks were important and should take leadership adopting the PAPSS as a payment platform for Africa using the commercial banks as an umbrella for execution.

Mr Segun Awolowo, Executive Secretary, National Action Committee on AfCFTA (NAC-AfCFTA), expressed joy that bankers were keying into his visions to boost exportation by embracing PAPSS

Awolowo explained the benefits for the nation’s economy and for volume of trade within the African continent, adding that the ease of settlement of payments would boost momentum of trade.

Dr Hassan Mahmud, Director, Trade and Exchange, Central Bank of Nigeria (CBN), said for too long, international business-to-business (B2B) payments in Africa had endured painstaking challenges.

Mahmud listed the challenges to include: Opaque transactions expensive fees, delays and unpredictable timing.

“However, simpler cross-border payments using multi-currency accounts, low fees and fast transactions across borders are being enabled via digital payment platforms including the PAPSS.

“Thus, opening up new pathways of possibilities, benefits and opportunities,” he said.

He reeled out global trade figures and how Africa was lagging behind in both inter and intra-regional trade because of payment safety and efficiency issues.

He said the launch of the PAPSS would help to deepen intra-African trade by addressing weak and insecure payment problems.

He said the CBN was one of the first Central Banks to join the PAPSS network at inception while listing Nigerian banks and payment gateway providers already linked to the PAPSS.

Panellists at the event discussed regulatory frameworks, challenges of cross-border payments, how to overcome them as well as how banks could engage the customers to boost trade within the continent to create wealth. (NAN)

Edited by Olawunmi Ashafa