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Home World New Pan-African Payments System Provides Big Relief for African Traders

New Pan-African Payments System Provides Big Relief for African Traders

Kingsley Ighobor
  • Opinion by Kingsley Ighobor (united nations)
  • Inter Press Service

“I paid $30 as transfer fee, $35 as SWIFT charges and another $100 bank charges,” Adele informed Africa Renewal. SWIFT stands for Society for Worldwide Interbank Financial Telecommunication, a world community that processes worldwide funds.

Adele didn’t try to make use of monetary providers corporations equivalent to Western Union or MoneyGram as a result of the “exchange rate for those companies is just bad.”

The different possibility would have been to fly to Lagos, a three-hour journey, carrying the bodily money alongside. “I have done that a few times,” he mentioned, “but it is not cost-effective unless it’s a huge amount, and it is risky.”

Traders throughout Africa expertise comparable ordeal paying for items or providers throughout borders. In the method they lose invaluable money and time.

This cumbersome and time-consuming course of “costs us about $5 billion in charges each year,” in line with Benedict Oramah, President of the African Export-Import Bank (Afreximbank), who mentioned, in an interview with Africa Renewal: “We are a poor continent. We shouldn’t waste money like that.”

Payment system launched

To handle the scenario, Afreximbank has partnered with the African Continental Free Trade Area (AfCFTA) Secretariat to launch the Pan-African Payments and Settlement Systems (PAPSS), a platform that facilitates instantaneous cross-border funds in native currencies between international locations.

On utilizing WAMZ for the pilot, Prof. Oramah says: “The six WAMZ countries have different currencies. One of the countries is Francophone and the others are Anglophone. You have a big economy like Nigeria and then you have smaller economies. So, anything that can go wrong in other parts of Africa would have gone wrong in the WAMZ, and we will have been able to address it during the piloting phase.”

The operational rollout of PAPSS was introduced on the finish of September, that means that international locations’ central banks, which would be the clearing brokers, can now coordinate with Afreximbank, which is the primary clearing agent and supplier of settlement ensures and overdraft amenities.

Afreximbank doled out $500 million to service West Africa and intends to supply an extra $3 billion for an Africa-wide PAPSS operation.

Analysts anticipate African merchants, particularly these in West Africa, to start to make the most of the platform by the tip of 2021.

Oramah, who relies in Cairo, Egypt, explains the hurdles confronted by African merchants in private phrases: “I want to transfer money to Nigeria from Egypt. It goes through a corresponding bank in a country outside of Africa before it arrives in Nigeria. I pay charges before the person in Nigeria gets it.

“And it takes time. Sometimes it takes weeks. So, we calculated how much that costs the continent—forget about the time—it costs Africans $5 billion yearly.

“Also, if I am in Egypt, and I want to watch my favourite Nollywood movies, I probably have to remit in US dollars. But the PAPSS changes that for you. All you need do is pay the Nigerian producer in Nigerian Naira.”

The CEO of PAPSS Mike Ogbalu says that through the piloting part in West Africa, financial institution accounts in several international locations have been debited and credited inside 10 seconds. He has assured of a strong know-how that may deal with giant transactions.

How PAPSS works

Sending cash utilizing the PAPSS is a five-step course of:

    • The first step is when a person points a fee instruction to their native financial institution or fee service supplier.
    • Second, the financial institution or the fee service supplier sends the directions to PAPSS.
    • Third, PAPSS validates the fee instruction.
    • Fourth, upon profitable validation, PAPSS will ahead the instruction to the beneficiary’s financial institution or fee service supplier.
    • Lastly, the financial institution or fee service present pays the transferred funds, in native foreign money, to the beneficiary.

In asserting the rollout of PAPSS, Afreximbank says that by “simplifying cross-border transactions and reducing the dependency on hard currencies for these transactions, PAPSS is set to boost intra-African trade significantly.”

Intra-African commerce is at present at a meager 17 per cent.

The PAPSS can also be anticipated to result in will increase in worth addition to merchandise, jobs creation and extra earnings for merchants.

Wamkele Mene, the Secretary-General of AfCFTA Secretariat, mentioned PAPSS will result in environment friendly cross-border commerce transactions and put Africa on a brand new financial trajectory.

“There are 42 currencies in Africa. We want to make sure that a trader in Ghana can transfer Ghanaian cedi to a counterpart in Kenya who will receive Kenyan shillings,” Mene informed Africa Renewal in an earlier interview.

Adele agrees that PAPSS will assist his enterprise. “If I can take the Leones to a bank here and pay for printing products in Nigeria, and the money is instantly deposited in the beneficiary’s account in Nigeria, that would be extraordinary,” he says.

Until briefed by Africa Renewal, Adele was not conscious of the PAPSS, underscoring the communication problem of elevating intra-African merchants’ consciousness in regards to the platform.

Oramah notes, nonetheless, {that a} marketing campaign is underway to market and promote the PAPSS, hoping that by the tip of the 12 months African merchants will likely be knowledgeable sufficient to make use of the system.

Source: Africa Renewal, which stories on, and examines, the numerous totally different points of the UN’s involvement in Africa, particularly throughout the framework of the New Partnership for Africa’s Development (NEPAD).

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© Inter Press Service (2021) — All Rights ReservedOriginal supply: Inter Press Service

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