Afreximbank Partners AU to Develop Pan – African Payment System Under AFCFTA
By Ndubuisi Micheal Obineme
Afreximbank has partnered with African Union and other member states to develop a Pan-African Payments and Settlements System for trade transactions in local currencies within the African Continental Free Trade Area.
In an interview with our correspondent, Afreximbank Regional Chief Operating Officer for Southern Africa, Humphrey Nwugo noted that the Bank has embraced the transformative potential of the AfCFTA for African economic development. And the Bank is working closely with the African Union and member states to support the implementation of the AfCFTA through several financing and facilitation instruments.
Humphrey confirmed that Afreximbank has partnered with the African Union to roll out the Pan-African Payments and Settlements System, which will facilitate the payment and settlements of trade transactions in local currencies and overcome the challenge of currency inconvertibility and foreign exchange shortages that hamper intra-African trade.
According to him, Afreximbank is also developing an African Collaborative Transit Guarantee Scheme which will provide a single transit guarantee that will facilitate the movement of goods throughout the continent.
He further explained that the Bank also developed its automotive strategy which will facilitate the development of the African automotive sector and facilitate trade under the AfCFTA.
In his words, “The strategy focuses on the development of automotive regional value chains, automotive financing and development of national and regional policies and strategies creating an enabling environment for the automotive industry.
“The automotive sector will catalyse the development of other sectors such as steel, textiles and leather, glass manufacturing, petrochemicals, electronics and so on.”
Pan – African Payment and Settlement System (PAPSS) is sponsored by Afreximbank in collaboration with the African Union and some African central banks.
It is a central financial market infrastructure to support payment arrangements to expand the international trade of African States, and to facilitate economic and financial integration of Africa.
PAPSS expects to connect the entire continent and handle instant payments in multiple African currencies and provide a settlement mechanism that creates trust within the ecosystem.
PAPSS will then enable all participants for example those in the oil and gas industry to send or receive cross-border payment from each other in real-time.
This brings two critical changes to Africa’s trade finance: minimising the use of hard currencies in trade payments, and domesticating payments and settlements within Africa. This in turn will help organisations and their financiers manage currency risks better.
The African Continental Free Trade Area is a free trade agreement which, as of 2020, about 34 African countries has ratified the agreement. AfCFTA will create the largest free trade area in the world measured by the number of countries participating. The pact connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion.
The African Continental Free Trade Area will commence by January 2021.
