Seamless Payments, Stronger Trade: Papss And The Future Of AFCFTA

INTRODUCTION

On January 13^th, 2022, the Pan-African Payment and Settlement System (‘’PAPSS’’) was commercially launched by the African Export-Import Bank (“Afreximbank”) in collaboration with the African Union (AU) and the African Continental Free Trade Area (AfCFTA), following a successful test phase in the West African Monetary Zone (“WAMZ”) countries.

PAPSS is a centralised system for processing, clearing, and settling of cross border trade and commerce payments among African countries. It replaces the current correspondent banking regime for intra-African trade, especially for large-value, cross-border payments. The full implementation of PAPSS could potentially pave the way for the introduction and possible adoption of a unified currency for the African Continental Free Trade Area, as well as the development of an African Central Bank.

PAPSS has been recognised as the first centralised continent-wide payment market infrastructure for intra-Africa trade and commerce payments processing, clearing and settlement.¹

HOW PAPSS WORKS

The PAPSS operates on a multilateral, net settlement basis with Afreximbank acting as the main settlement agent in partnership with participating African Central Banks. PAPSS has an instant payment system (PIP™) which supports wholesale and retail real-time payments. PAPSS transactions can only be conducted through a participating Bank or Payment Service Provider (PSP) collectively referred to as the Participant. A Participant is required to sign-up to PAPSS after successfully completing an on-boarding process and fulfilling the set-out requirements.²

To enable PAPSS make instant payments across African borders in local currency, PAPSS follows three core processes viz instant payment, pre-funding and net settlement.³ These processing as examined in greater detail below.

INSTANT PAYMENT

For instant payment, an originator issues a payment instruction in their local currency to their Bank or PSP which is then sent to PAPSS. PAPSS carries out all necessary validation checks on the payment instruction and forwards it to the beneficiary’s bank or PSP after which the beneficiary’s bank clears the funds to the beneficiary in their local currency. Instant payment eliminates the requirement for participants to convert local currencies into hard currencies to enable settlement of payment, which required cash to leave Africa, be converted, and then remitted back to the beneficiary bank, thereby increasing timelines in cross-border transaction.

PRE-FUNDING

As a result of the instant payment process, PAPSS will need to guarantee that funds are available to complete the originator’s transaction before effecting the movement of debits and credits between Participants’ accounts. Participants must, therefore, agree to a pre-funding arrangement.

Direct Participants are participants who integrate directly with PAPSS and the real-time gross settlement (RTGS) systems of Central Banks in the pre-funding process. Participants without an RTGS account are Indirect Participants who fund or defund their clearing accounts on PAPSS with the aid of a Direct Participant providing the required liquidity. Notifications are carried via the ISO 20022 messaging standard which is the global messaging standard for financial information, notifying PAPSS, the Participants and RTGS of the status of every stage of the transaction.

The overall process will involve the Direct Participant issuing a credit instruction to the settlement account in the Central Bank RTGS, the RTGS of the Central Bank credits the pre-funded account of Direct Participant and notifies PAPSS who thereafter credits Direct Participant’s clearing account. Indirect Participants leverage Sponsorship Agreements to issue funding instructions via Direct Participants. Sponsorship Agreements are agreements entered into between Direct and Indirect participants where a Direct Participant agrees to act on behalf of an Indirect Participant in this case the Direct Participant agrees to send payments through PAPSS on behalf of the Indirect Participant.

NET SETTLEMENT

The final settlement of transactions on PAPSS occurs on an overall net basis at a designated time daily between participating Central Banks and the PAPSS designated settlement Bank. PAPSS will need to ensure prompt settlement within 24 hours. Net settlement across all participating Central Banks occurs at the same time. At End of Day (currently 11am UTC), PAPSS determines net position in local currency for all participating Central Banks after which credit or debit settlement instruction are sent to the Central Bank RTGS (Real Time Gross Settlement) (depending on net position). The Central Bank RTGS is the Central Bank system which is used to process debits or credits between PAPSS Pre-funded Account and Central Bank Suspense account and confirmation settlement is sent to PAPSS. PAPSS mirrors Central Bank instruction to conclude local currency settlement, issues equivalent hard currency settlement instruction (based on the net position) to Afreximbank. Afreximbank credits or debits the Central Banks’s hard currency settlement account held in Afreximbank and confirms to PAPSS.

Rather than settling every single transaction individually, PAPSS adds up all payments made during the day and calculates the net amount each country owes or is owed. These balances are then settled through Central Banks in local currencies, while Afreximbank handles the final balancing between countries in hard currency ensuring everything is completed within 24 hours.

In simple terms, the entire process involves the following steps;

1. An originator issues a payment instruction to their local bank or PSP.
2. The payment instruction is sent to PAPSS through the country’s Central Bank and routes it to the beneficiary bank account.
3. PAPSS is responsible for performing all validation checks on payment instruction before it sends it forwards it to the beneficiary’s Central Bank and eventually to the local bank account.
4. PAPSS sends credit or debit settlement instruction to the Central Bank of the originator and the Central Bank of the beneficiary. The Central Banks settle the transaction in hard currency, using Afreximbank as the settlement agent.
5. Once the cross-border net settlement is complete, the beneficiary receives the funds in their local currency.

PAPSS FROM A NIGERIAN PERSPECTIVE

Nigeria is a participating member state in the Pan-African Payment and Settlement System (PAPSS). To regulate the implementation of PAPSS in Nigeria, the Central Bank of Nigeria (“CBN”) issued Guidelines titled “Guidelines on the Operations of Pan-African Payments and Settlement System (PAPSS) in Nigeria” on 11^th October, 2021 and a Circular titled “Re: Introduction of the Pan African Payments and Settlement System (PAPSS)” on 25th July, 2023 with a recent review in 2025, to provide clarity on the implementation of PAPSS.

Over 22 Nigerian banks are already on board, with major banks integrating PAPSS into their mobile apps (e.g., AccessMore, ALAT, UBA LEO) for easy access.⁴ In 2024, the CBN lifted previous transaction limits and in 2025, it focused on easing intra-African trade by simplifying documentation for low-value transactions (up to $2,000 for individuals and $5,000 for corporates) and allowing Authorised Dealer Banks (ADBs) to source foreign exchange directly from the Nigerian Foreign Exchange Market for PAPSS settlements without recourse to the Central Bank of Nigeria (CBN).⁵

The CBN Guidelines enable local currency payments through PAPSS thereby allowing transactions amongst African countries without needing third currencies like the United States Dollar (USD). Eligible transactions under PAPSS are limited to trade-related purposes, meaning payments must be tied to the exchange of goods or services. However, this excludes items that are restricted from accessing foreign exchange under Central Bank regulations. While such goods may still be traded through alternative means, they cannot be financed or settled using official foreign exchange channels which includes PAPSS. In addition, cross-rate conversions for PAPSS utilise the prevailing exchange rate at the Investors and Exporters (I&E) Forex Window.

The Guidelines provided by CBN are highly commendable as they aim at enhancing transparency, promoting greater participation by banks, promoting the efficient use of PAPSS for intra-African trade transactions, reducing transaction costs, efficiently managing CBN’s foreign exchange reserves, preventing potential misuse of PAPSS and overall, improving cross-border payment efficiency. Through the Guidelines, the CBN seeks to boost confidence in the PAPSS initiative and support sustainable economic growth within Nigeria and the broader African continent. This will potentially drive the ease of intra-Africa trade and promote the AfCFTA.⁶

Other countries such as Ghana and Comoros have put frameworks in place to effectively implement PAPSS. Although, not all countries issue their own distinct “guidelines” in the same manner as Nigeria, each participating nation’s Central Bank collaborates with PAPSS and establishes the necessary local regulatory frameworks for commercial banks and payment service providers to connect.

BENEFITS OF THE PAPSS

The PAPSS has been piloted successfully in the six countries that comprise the West African Monetary Zone (WAMZ) including Nigeria, the Gambia, Sierra Leone, Liberia, Ghana, and Guinea. PAPSS is beneficial to Participants, customers and African governments. The benefits and purposes of PAPSS are numerous and they include:⁷

• It provides a platform for innovation and creativity thereby increasing access to markets
• It simplifies cross-border payment performance which no longer requires multiple correspondent banking relationships
• It decreases foreign exchange liquidity and eases pressure on current accounts
• It increases transparency for greater oversight of cross-border transactions, which increases the potential to generate revenue
• It enhances financial inclusion and improved economic growth
• It provides for near instant payments across African borders without converting to different currencies
• It improves working capital through payment certainty and faster transactions
• It provides access to payment-facilitating options for millions of Africans, including those previously underserved
• It will reduce the cost, duration and time variability of cross-border payments across Africa thereby decreasing the liquidity requirements of commercial banks for cross border payments and strengthen oversight of cross border payment systems by African Central Banks
• It boosts intra-African trade through seamless and its secure payment feature.

PAPSS AND THE PROMOTION OF INTRA-AFRICAN TRADE UNDER AFCFTA

The introduction of PAPSS is an important turning point for the AfCFTA. AfCFTA creates a single, liberalised market for goods and services across Africa, promoting economic integration, industralisation and sustainable development among member states. AfCFTA aims to boost intra-African trade, attract investment and enhance Africa’s global competitiveness. With the introduction of PAPSS there has been an increased efficiency in supply chain and working capital management of African businesses through ease of payment.

PAPSS allows businesses to transact in local currencies which helps reduce exchange rate risks and the reliance on hitherto adopted western currencies. Although other African currencies equate to foreign exchange, the implementation of PAPSS eliminates the need for external intermediary currencies like the United States Dollar by enabling direct, locally managed currency conversion and settlement within Africa.

Furthermore, PAPSS allows for increased access to markets and has made it easier for businesses to access trade finance, enabling more participants in intra-Africa trade, thereby promoting the vison of AfCFTA. This supports the growth of small and medium-sized enterprises (SMEs) across Africa.

PAPSS promotes effective payments for intra-Africa trade by providing Banks and Payment Service Providers direct access to a network of payment institutions in Africa, thereby minimising liquidity complexities from operating multiple correspondent banking accounts and transaction processing fees.

CONCLUSION

The PAPSS is a highly commendable introduction in promoting and boosting intra-African trade. It has the potential to effectively promote the successful operation of the AfCFTA through proper utilisation and implementation. PAPSS introduces a new dispensation of economic intersection for companies and businesses across Africa through secure payments that enable free flow of trade thereby promoting economic growth and buoyancy.

Footnotes

1 Ubah Jeremiah Ifeanyi, ‘Understanding the Hype around PAPSS and How It Works’ Available at < https://nairametrics.com/2022/01/17/understanding-the-hype-around-papss-and-how-it-works/> Information

2 https://papss.com/how-it-works/

https://assets.kpmg.com/content/dam/kpmg/ng/pdf/afcfta-series.pdf

3 https://papss.com/how-it-works/

4 https://papss.com/wp-content/uploads/2025/08/PAPSS-LIST-OF-LIVE-COMMERCIAL-BANKS_04082025x.pdf

5 TEDFEMPUBFPC001006.pdf

6 https://www.cbn.gov.ng/Out/2023/TED/Circular%20on%20PAPSS.pdf

7 https://azafinance.com/papss-what-it-is-benefits-and-how-it-works/

‘Pan-African Payment and Settlement System Launched by President Akufo-Addo Foreseeing $5 Billion Annual Savings in Africa’ < https://www.afreximbank.com/pan-african-payment-and-settlement-systemlaunched-by-president-akufo-addo-foreseeing-5-billion-annual-savings-for-africa/

8 Ibid