The Pan-African Payments and Settlement System (PAPSS) is set to launch “The Africa Currency Marketplace” this year, a groundbreaking initiative designed to dismantle the barriers hindering seamless cross-border trade across the continent. This ambitious project aims to establish a direct currency exchange platform, eliminating the longstanding reliance on third-party currencies like the U.S. dollar.
For years, African businesses have grappled with the complexities of foreign exchange. The vision of a unified African market, as envisioned by the African Continental Free Trade Area (AfCFTA), has been consistently hampered by the inefficiencies of existing currency systems. PAPSS’s move, therefore, represents a pivotal moment.
“Our system will intelligently match them, and then party A will get Naira in Nigeria, and party B will get birr in Ethiopia. The transaction just completes without any third-party currency being involved at all,” Mike Ogbalu, CEO of PAPSS, told Reuters. This simple yet profound statement encapsulates the transformative potential of the marketplace.
The core challenge PAPSS seeks to address is the persistent issue of forex illiquidity, a problem that has forced businesses into costly and inefficient workarounds. The 2023 currency swap deal between Dangote Cement and Ethiopian Airlines, involving a staggering $100 million, serves as a stark reminder of the financial strain caused by these limitations. As reported, Ethiopian Airlines had $180 million trapped in Nigeria, while Dangote Cement faced a $300 million bottleneck in Ethiopia. This situation is not an isolated incident; it reflects the systemic challenges faced by businesses across the continent.
“The rates will be market-driven, and our system is able to do a matching based on the rates offered by different participants in our ecosystem,” Ogbalu stated. This market-driven approach ensures transparency and fairness, fostering trust among users.
While recent reforms in key economies like Nigeria, Egypt, and Ethiopia have brought some relief, the underlying challenges persist. This has created an opening for fintech companies like Yellow Card, which leverage cryptocurrency to facilitate cross-border payments, reportedly processing $3 billion in transactions in 2024 and supporting over 30,000 businesses. These innovations highlight the urgent need for more robust and efficient payment systems.
PAPSS’s integration with approximately 150 commercial banks and 15 central banks across Africa provides a solid foundation for the Africa Currency Marketplace. This extensive network is crucial for ensuring widespread adoption and accessibility.
The implications of this initiative extend beyond mere financial transactions. By fostering a more integrated trade ecosystem, PAPSS is contributing to the broader goals of AfCFTA. The reduction in reliance on external currencies not only enhances financial autonomy but also strengthens intra-African trade, creating opportunities for economic growth and development.
This initiative provides hope for small and medium-sized enterprises (SMEs) that have long struggled with the complexities of cross-border trade. Imagine a small business owner in Kenya, now able to seamlessly trade with a partner in Ghana, without the fear of fluctuating exchange rates or lengthy transaction delays. This is the promise of the Africa Currency Marketplace.
Utimately, the launch of the Africa Currency Marketplace by PAPSS is a landmark development that has the potential to reshape the landscape of African trade. By addressing the critical issue of forex illiquidity and providing a platform for direct currency exchange, PAPSS is paving the way for a more integrated and prosperous African economy.
