In a strategic move to deepen continental economic integration and cut foreign transaction costs, Nigeria and 14 other African countries have fully embraced the Pan-African Payment and Settlement System (PAPSS) a game-changing initiative designed to facilitate seamless cross-border trade in local currencies. As a result, intra-African trade has surged to $220 billion, signaling growing momentum behind the African Continental Free Trade Area (AfCFTA).

The PAPSS system, developed by the African Export-Import Bank (Afreximbank) in collaboration with the African Union (AU) and AfCFTA Secretariat, is now reducing the need for U.S. dollar transactions in regional trade, improving payment efficiency and reducing the cost of doing business across African borders.

What Is PAPSS and Why It Matters

The Pan-African Payment and Settlement System (PAPSS) is a centralized financial market infrastructure that enables instant, cross-border payments in local African currencies. Rather than converting payments through U.S. dollars or euros—which often incurs high charges and delays businesses and banks in participating countries can now settle trade payments directly in their own currencies.

For Nigeria, Africa’s most populous nation and one of its largest economies, participation in PAPSS represents a major milestone in reducing foreign currency dependency and promoting naira-denominated trade across the continent.

Intra-African Trade Reaches $220 Billion

According to Afreximbank, the operationalization of PAPSS has helped intra-African trade climb to $220 billion, accounting for a growing share of the continent’s total trade volume. This increase is directly linked to reduced transaction costs, faster settlements, and a more inclusive trading environment for small and medium enterprises (SMEs).

The 15 countries currently connected to PAPSS include Nigeria, Ghana, Sierra Leone, Liberia, Guinea, Gambia, and other West African nations, with several more in the pipeline. Together, they are paving the way for a truly borderless African trade environment where local producers and businesses can compete on a level playing field.

Nigeria’s Role and Economic Gains

For Nigeria, the benefits of PAPSS are multi-dimensional:

• Cost Reduction: Nigerian exporters and importers no longer need to source U.S. dollars to trade with neighboring countries, significantly cutting costs and eliminating exchange rate losses.

• Faster Transactions: Settlements that once took days via intermediary banks now occur within minutes, boosting liquidity for businesses and improving cash flow management.

• SME Empowerment: PAPSS is particularly beneficial to Nigerian small and medium-sized enterprises, which previously faced high barriers to cross-border trade due to forex constraints.

• Boost for the Naira: The system promotes the use of local currencies, giving the naira more relevance in regional trade while reducing dollar demand and forex market pressure.

Strengthening AfCFTA Implementation

The growing adoption of PAPSS also strengthens the implementation of the African Continental Free Trade Area, which aims to create the largest single market in the world, covering 1.4 billion people and a combined GDP of over $3.4 trillion.

By resolving one of the key logistical and financial barriers to trade currency conversion and payment bottlenecks—PAPSS brings AfCFTA closer to its goals of reducing trade barriers, increasing industrial output, and creating millions of jobs across Africa.

Challenges and the Road Ahead

Despite its successes, PAPSS faces several implementation challenges:

• Limited awareness among local businesses and banks.

• Technical integration issues with existing banking infrastructure.

• Regulatory harmonization across multiple jurisdictions.

However, institutions like the Central Bank of Nigeria (CBN) and Afreximbank are working to address these through public campaigns, training programs, and investment in cross-border fintech infrastructure.

Conclusion: Toward a More Connected Africa

Nigeria’s active participation in PAPSS signals a turning point in Africa’s journey toward self-sustaining economic cooperation. As more countries adopt the system, intra-African trade will become faster, cheaper, and more inclusive, breaking the historic dependence on foreign currencies and external markets.

With trade volumes rising and operational efficiency improving, PAPSS is not just a payment system—it is a catalyst for continental economic transformation, and Nigeria is right at the heart of it.

Published on Xamblog.com – Unpacking progress in trade, finance, and African economic integration.

Last Updated on June 28, 2025 by kingstar