President William Ruto has called upon African leaders to embrace a pan-African payments system for facilitating trade within the continent. Speaking at a forum on the African Continental Free Trade Area (AfCFTA) in Nairobi, the President noted that this would be a significant move aimed at reducing reliance on the US dollar.
He urged his fellow African heads of state to rally their central and commercial banks to join the Pan-African Payments and Settlement System (PAPSS), which was launched in January 2022.
President Ruto highlighted the reliance on the US dollar as a hindrance to intra-African trade and stressed the need for a local currency trading mechanism.
The PAPSS, developed by the African Export-Import Bank (Afreximbank) and the AfCFTA Secretariat, received strong support from the African Union and African central banks. Its objective is to address the challenges faced by African nations in making cross-border payments due to currency disparities.
“We are all struggling to make payments for goods and services from one country to another because of differences in currencies. And in the middle of all these, we are all subjected to a dollar environment,” said President Ruto. He further stressed the importance of a system where traders could conduct business using local currencies while leaving the task of currency settlements to Afreximbank.
Currently, African traders and local banks often resort to correspondent banks, predominantly located in the US and Europe, to facilitate transactions between two African currencies, normally in dollars or sometimes euros. This reliance on external banks and foreign currencies adds complexity and costs to intra-African trade.
President Ruto’s call for Africa to embrace PAPSS is part of a broader effort to strengthen regional integration and foster economic growth within the continent.
By utilizing a pan-African payments system, African businesses will be able to focus on moving goods and services efficiently, while Afreximbank takes on the responsibility of settling payments in local currencies. This shift aims to streamline trade processes, reduce dependence on foreign banks, and promote economic self-sufficiency within the continent.
The proposed adoption of PAPSS would mark a significant milestone in advancing regional economic integration and signaling a departure from the dominance of the US dollar in African trade.
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