Ghana’s Vice President, Dr Mahamudu Bawumia, has called on the African Export-Import Bank (Afreximbank) to re-examine its current strategy in the implementation of a centralised 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 centralised payment market infrastructure for processing, clearing, and settling intra-African trade and commerce payments.
It is expected to facilitate payments and formalise some of the unrecorded trade due to the prevalence of informal cross-border trade in Africa.
Vice President Bawumia said instead of requiring individual financial institutions across the continent to connect to a central database, it would be a more straightforward, quicker and more effective method to plug in the existing payment structures operated by African Central Banks into a central system at Afreximbank.
Dr Bawumia made the call on Tuesday in Accra when he opened the 5th Ghana International Trade and Finance Conference (GITFiC 2021), which is being attended both physically and virtually by senior officials of African central banks, the African Union, West African Monetary Institute, members of the Diplomatic Corps, and other critical stakeholders in the African Continental Free Trade Area (AfCFTA).
He said it would be a very inefficient way to proceed and create a long delay in the payment systems if individual financial institutions are asked to connect to the Pan African Payment and Settlements System, as it is currently happening.
Vice President Bawumia said financial systems within each of the countries have switches and financial institutions that are all connected to those 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 that 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,” he stated.
He said, “it would be similar in Nigeria, similar with the BCEAO. If we want to wait for each financial institution to connect directly, there will be a long delay in the process, but we don’t have time.”
Speaking to the theme for the Conference, “Facilitating Trade in AfCFTA; The Role of the Financial Services Sector”, Vice President Bawumia said that a simple, efficient payment system is an integral part of ensuring continental trade.
“After all, payments are at the heart of the day-to-day functioning of a 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 realise the vision of the continental free trade.”
With intra-African trade expected to improve from the single-digit levels to over 60 per cent, the Pan African Payments and Settlement System will allow businesses on the continent to clear and settle transactions in their local currencies without depending on 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
Rex Mainoo Yeboah, ISD