Afreximbank’s PAPSS continental payment system joined by 11 African central banks

The Africa Export-Import Bank, or Afreximbank, has incorporated 11 African central banks into its flagship Pan-African Payment and Settlement System (PAPSS) that offers an alternative in which participants can conduct transactions in their currencies, eliminating the necessity for a third-party currency such as the US dollar.

The PAPSS is one of the Afreximbank’s efforts aimed at reducing expenses and streamlining trade across the region’s 55 territories. The bank expects the remaining central banks to join the payment system by next year. “Trade goes well where payments can be made easily, and this is why we can only see trade pick up if we see improvement in efficient payments,” John Bosco Sebabi, PAPSS deputy CEO has noted in an interview with CNBC.

Afreximbank estimates that over 80% of intra-African payments currently pass through either Europe or the United States, a process that incurs as much as $5 billion in fees and compliance costs.

The bank says that PAPSS, a partnership with the African Union (AU), will provide an alternative in which participants will transact in their own currencies without the need for a third party currency like the US dollar. Key participants in the PAPSS system are central banks, which will act as regulators and clearance agents, commercial banks, fintech companies, payment service providers to their customers, including businesses across the region.

Launched by AU in 2021, the AfCFTA, as the largest free trade area in the world, has an overarching goal of establishing a single continental market with a combined GDP of around $3.4 trillion and a population of over 1.3 billion. However, the region has the world’s lowest intra-regional trade volumes, standing at 18%, in stark contrast to Europe’s 70% and Asia’s 59%.