Advantages of Pan-African Payment and Settlement System on Economic Growth of Africa

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The Pan-African Payment and Settlement Systems (PAPSS) has been rolled out among all central banks in Africa

Pan-African Payment and Settlement System (PAPSS) is a cross-border financial market infrastructure that enables payment transactions across Africa and will bridge trade setbacks among the 41 known currencies in Africa.

The payment system was rolled out among central banks Africa. The PAPSS was launched in Ghana on 15 January.

Six central banks have already signed up for PAPSS. The six pilot central banks are Bank of Ghana, Central Bank of Gambia, Central Bank of Liberia, Central Bank of Nigeria, Central Bank of Republic of Guinea, Bank of Sierra Leone.

Read also: CBN Governor Godwin Emefiele Makes List of Top 10 Best Performancing Central Bank Governors in Africa

Advantages of Pan-African Payment and Settlement System

The economic benefits of the Pan-African payment system are enormous and can’t be overemphasized. 

Information on PAPSS website says its objective is to “bringing together a growing network of central banks, commercial banks, payment service providers and other financial intermediaries, recognising the economic benefits of simplifying the payment landscape across the African continent so that more Africans can trade with each other.” In other words, the Pan-African Payment and Settlement System will have the following advantages to the African economic development:

Will reduce costs of doing business

It is estimated to save Africa around $5bn in transaction cost. Some of these costs arise from cost of carrying cash across the borders, forex cost, payment processing time. With PAPSS intra-Africa cross-border payments will be seamlessly done in real time. 

Aid of intra-African trade

Another advantage of the PAPSS to the continent is the facilitation of the intra-African trade which is enabled by the African Continental Free Trade Area. 

The Vice President of the Africa Development Bank, Solomon Quaynor said, “The new payment system is critical to our quest to boost intra- African trade and reduce cost of doing business for Africans which has been an impediment for some time now.”

Will boost values of local currencies

This new payment system does not require forex for trade settlement and other remittances, and would thereby help in strengthening the local currencies of the member states.

Job creation

The Pan-African Payment and Settlement System is a payment infrastructure that would need the services of third party agents like the banking and mobile money agents.

What the Chief Executive of PAPSS, Mike Ogbalu, said during the launch in Ghana confirmed this.

“The system we have built is an infrastructure that will require third party interactions, so we may need even mobile money agents and other payment channels.

“By this way, traders can transact without necessary going to the banks when they need to send cash to other countries”

Also read: Untapped Opportunities in Agency Banking and Mobile Money Business in Nigeria

May facilitate West Africa Single Currency project

By bringing together the central banks, commercial banks in Africa using a single platform for payments settlements, it may give hint on the possibility of having single currency in West Africa and indeed in Africa like the Euro zone.

Read also: List of African Countries that Have Banned Cryptocurrency

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