Pan African Payments System: How It Works And More.. -

Vice President of Ghana- Dr Mahamudu Bawumia

Vice President of Ghana-Mahamudu Bawumia has approached the African Export-Import Bank (Afreximbank) to rethink the strategy it is currently using to carry out a concentrated payment and settlement system for intra-African trade and commerce payments.

The Pan African Payments and Settlement System (PAPSS), developed by the Afreximbank is the first centralized payment market infrastructure for processing, clearing and settling of intra-African trade and commerce payments. It is expected to facilitate payments as well as formalise some of the unrecorded trade due to prevalence of informal cross-border trade in Africa.

Rather than building a whole new structure from scratch, which would require individual financial institutions across the continent to connect to a central database, Ghana’s Vice President believes a simpler, quicker and more effective method would be to plug in the existing payment structures being operated by African Central Banks into a central system at Afreximbank.

Dr Bawumia settled on the decision on Tuesday, July 27, 2021 in Accra at the opening function for the fifth Ghana International Trade and Finance Conference (GITFiC 2021). The Conference is being attended by both physically and virtually by senior officials of African national banks, the African Union, West African Monetary Institute individuals from the Diplomatic Corps, and other key partners in the African Continental Free Trade Area (AfCFTA).

In his address, the Dr Bawumia said:

“If you look at the financial systems within each of the countries, you have switches and financial institutions are all connected to these switches, whether it’s in Ghana or Nigeria or the BCEAO. I think the easiest and quickest way for us to go as a continent is to have the national switches connect directly to the Pan African Payments and Settlements System. So when the national switch in Ghana, for example, under GhIPPS, connects to PAPPS, it brings along immediately all the 23 or so banks that are functional. It would be similar in Nigeria, similar with the BCEAO. If we want to wait for each individual financial institution to connect directly, there will be a long delay in the process but we don’t have time.

The Vice President has subsequently adviced that we should move towards the national payment system interfacing transparency to the Pan African Payment and Settlements System. He said, that will bring every one of the monetary organizations under their switches for them to push ahead.

Alluding to the theme for the Conference, “Facilitating Trade in AfCFTA; The Role of the Financial Services Sector”, Vice President Bawumia noticed that a basic, effective payment system is a fundamental part of guaranteeing Continental trade.

The Vice President continued by expressing that:

“After all, payments are at the heart of the day-to-day functioning of free trading system. Making sure that the underlying payment system runs smoothly is the least we should expect of the financial system if we are to realize the vision of the continental free trade.”

With intra-African trade expected to improve from the single-digit levels to more than 60%, the Pan African Payments and Settlement System will permit organizations on the continent to clear and settle trades in their neighborhood monetary standards without relying upon third party currencies.

It will also provide an alternative to the current high-cost and long correspondent banking relationships by facilitating trade and other economic activity across African countries through a simple, low-cost, and risk-controlled payment clearing and settlement system.