The Pan African Payment and Settlement System (PAPSS) offers an opportunity for countries in the ECOWAS region to expedite the long-awaited goal of a single currency within the West Africa Monetary Zone, Head of Mission, Afrexim Bank, Eric Monchu Intong, has said.
Mr. Intong, who was speaking on the theme: ‘Trade Finance and Pan African Payment Systems’ at the UPSA Law School-ACCA Africa Trade Roundtable V, said: “The PAPSS platform offers the opportunity to know the average rate of conversion of cedi to naira over the past decade using the dollar as an intermediary to benchmark the rate to a specific amount. Same criteria must be applied to all other African currencies. This will totally eliminate convergence criteria with the dollar”.
This process, he said, will easily renew the interest on the common currency agenda for the West Africa Monetary Zone, allowing the sub-region to easily determine whether to move naturally toward cedi, naira or the CFA, hence, narrowing interests to a single currency.
“The PAPSS, which allows net settlement by member-countries to all the other 54 countries on the continent, is expected to give hints on which country is settling which one more, and which currency can be used to narrow down on a single currency objective,” he added.
The PAPSS, Mr. Intong explained, also allows member-countries to pay only the net settlement through trade without relying on third currencies, adding: “Estimates at the Afrexim Bank indicate the continent could be saving some US$5billion each year through the system”.
“The system is designed to save cost, reduce pressure on FX reserves in various member-countries, and give trends on how each local currency can be converted,” he indicated.
The Dean of the UPSA Law School, Professor Ernest Kofi Abotsi, however, maintained that African countries must exhibit high level of trust and political will to make the PAPSS succeed on the continent.
“The huge disparity between all 42 African currencies and lack of interaction between African currencies is a bane which must be addressed. These currencies will rather deal with the dollar, euro, pounds and yen,” Prof. Abotsi said.
Prof. Abotsi explained that if African economies do not put themselves in positions of trust, things will not work out.
“If you have printing of currencies and domestic political pressures that lead to political economic decisions on the continent, there wouldn’t be trust in the various economies. These things probably explain the reason the ECO currency agenda appears to have stalled.”
The PAPSS
Despite the persistently large trade finance gap, trade remains a key driver of Africa’s social and economic development. The AfDB, African Export -Import Bank (Afrexim Bank) and the AfCFTA have been playing critical roles aimed at changing the narrative through multiple intervening policies.
The African Continental Free Trade Area (AfCFTA) has recently launched a ground-breaking digital integrated payment platform, the Pan African Payment and Settlement System (PAPSS), with the sole aim of eliminating instant payment, pre-funding and net settlement challenges associated with trade on the continent.
It is Africa’s first continent-wide digital system launched after a successful pilot within the West African Monetary Zone (WAMZ) region.
The PAPSS is expected to significantly enhance processing, clearing and settling of intra-African trade and payments through effective collaboration of multilateral net settlement systems.
The roundtable conversation explored trade financing opportunities and challenges which leveraged the prospects of PAPSS to accelerate trade within the bloc.
