UNITED NATIONS, November 26 (IPS) – When Fidelis Adele, CEO of Freetown-based Solid Graphics, a printing and communications company, needed to order some printing equipment from Nigeria in September, he paid $ 165 extra in addition to a $ 10,000 bank. transfer to the seller. Still, it took three days for the money transferred in Sierra Leone to be credited to the recipient’s account in Nigeria.
“I paid $ 30 as a transfer fee, $ 35 as a SWIFT fee and an additional $ 100 bank fee,” Adele told Africa Renewal. SWIFT stands for Society for Worldwide Interbank Financial Telecommunication, a global network that handles international payments.
Adele did not try to use financial services companies like Western Union or MoneyGram because “the exchange rate for these companies is just bad.”
The other option would have been to fly to Lagos, a three-hour journey, with the physical cash with it. “I’ve done it a few times,” he said, “but it’s not cost-effective unless it’s a huge amount, and it’s risky.”
Traders across Africa experience similar trials when paying for goods or services across borders. In the process, they lose valuable time and money.
This cumbersome and time-consuming process “costs us about $ 5 billion in fees each year,” according to Benedict Oramah, president of African Export-Import Bank (Afreximbank), which said in an interview with Africa Renewal: “We are a poor continent. We should not waste money that way.”
Payment system launched
To deal with the situation, Afreximbank has partnered with the African Continental Free Trade Area (AfCFTA) Secretariat to launch Pan-African payment and settlement systems (PAPSS), a platform that facilitates immediate cross-border payments in local currencies between countries.
On using WAMZ for the pilot project, Professor Oramah says: “The six WAMZ countries have different currencies. One of the countries is Francophone and the others are English-speaking. You have a large economy like Nigeria and then you have smaller economies. So anything that can go errors in other parts of Africa would have gone wrong in WAMZ, and we will have been able to deal with it during the pilot phase. “
The operational expansion of PAPSS was announced at the end of September, which means that countries’ central banks, which will be clearing agents, can now coordinate with Afreximbank, which is the main clearing agent and provider of settlement guarantees and overdraft facilities.
Afreximbank distributed $ 500 million to serve West Africa and intends to provide an additional $ 3 billion for a PAPSS operation covering the whole of Africa.
Analysts expect African traders, especially those in West Africa, to start benefiting from the platform by the end of 2021.
Oramah, based in Cairo, Egypt, explains the obstacles that African traders face in personal terms: “I want to transfer money to Nigeria from Egypt. It goes through a similar bank in a country outside Africa before it arrives in Nigeria. I pay fees before the person in Nigeria receives it.
“And it takes time. Sometimes it takes weeks. So we calculated how much it costs the continent – forget it – it costs Africans $ 5 billion a year.
“If I’m in Egypt and want to watch my favorite Nollywood movies, I’ll probably have to pay in US dollars. But PAPSS will change that for you. All you have to do is pay the Nigerian producer in Naira, Nigeria.”
PAPSS CEO Mike Ogbalu says that during the pilot phase in West Africa, bank accounts in different countries were debited and credited within 10 seconds. He has ensured a robust technology that can handle large transactions.
How PAPSS works
Sending money with PAPSS is a five step process:
• The first step is when an individual issues a payment instruction to their local bank or payment service provider. • Second, the bank or payment service provider sends the instructions to PAPSS. • Third, PAPSS validates the payment instruction. • Fourth, after successful validation, PAPSS will forward the instruction to the recipient’s bank or payment service provider. Finally, the bank or payment service provider pays the transferred funds, in local currency, to the recipient.
In announcing the expansion of PAPSS, Afreximbank states that by “simplifying cross-border transactions and reducing dependence on hard currencies for these transactions, PAPSS will significantly increase trade within Africa.”
Trade in Africa is currently at a paltry 17 percent.
PAPSS is also expected to lead to increases in value additions to products, job creation and more revenue for traders.
Wamkele Mene, Secretary General of the AfCFTA Secretariat, said that PAPSS will lead to efficient cross-border trade transactions and put Africa on a new economic path.
“There are 42 currencies in Africa. We want to ensure that a Ghanaian trader can transfer Ghanaian cedi to a Kenyan counterpart who will receive Kenyan shillings,” Mene told Africa Renewal in an earlier report. interview.
Adele agrees that PAPSS will help his company. “If I can take Leones to a bank here and pay for printed matter in Nigeria, and the money is immediately deposited in the recipient’s account in Nigeria, it would be extraordinary,” he says.
Until it was informed by Africa renewal, Adele was not aware of PAPSS, which underscores the communication challenge of increasing intra-African traders’ awareness of the platform.
Oramah notes, however, that a campaign is underway to promote and promote PAPSS, in the hope that by the end of the year, African traders will be sufficiently informed to use the system.
Source: Africa Renewal, which reports on, and reviews, the many different aspects of the UN’s engagement in Africa, in particular in the framework of the New Partnership for Africa’s Development (NEPAD).