The expense and difficulty of making cross-border payments in Africa has been one of the chief barriers to increased trade between African countries.

With a fragmented financial system and 41 different currencies in use, most Afri- can cross-border transactions are routed through foreign correspondent banks.

This process requires converting local currencies into dollars or euros before finally exchanging them into the recipi- ent’s currency – introducing not only high transaction costs but also financial risk due to exchange rate volatility.

Moreover, transactions routed through foreign banks may experience delays be- fore they are settled due to the multiplic- ity of intermediaries, hindering trade efficiency and disrupting business op- erations.

In response to these challenges, PAPSS allows cross-border payments to be made and received instantly in local currencies across participating banks in Africa. The process is simple: an originator in one African country issues a payment instruc- tion in their local currency to their bank or payment service provider (PSP). The instruction is validated by PAPSS, routed through the respective central banks, and settled in the beneficiary’s local cur-rency, bypassing the need for currency conversion.

Thanks to real-time gross settlement (RTGS), PAPSS enables near-instantaneous cross-border payments, eliminating de- lays of days or weeks associated with tra- ditional correspondent banking systems that route transactions through external banks.

PAPSS operates by linking the RTGS systems of individual African central banks. The platform integrates central banks, commercial banks, fintechs, and payment service providers (PSPs).

“We’re beginning to see meaningful scaling and adoption of PAPSS capabilities across digital channels, which is acceler- ating our impact,” said Mike Ogbalu, CEO of PAPPS, during Afreximbank’s annual meetings in June.

“We’re optimistic about the pace of adoption...by the end of this year, we expect to expand to 30 countries, cover- ing more than 500m bank accounts,” he added.

Afreximbank has already channelled over $40bn through PAPSS since its incep- tion to support trade payments in local currencies, underlining the platform’s capacity to support significant transac- tion volumes. With many of the conti- nent’s largest commercial banks – such as Ecobank, Zenith Bank and Standard Bank – already connected, PAPSS is poised to unlock a host of economic benefits for customers.

African corporate and SME customers who make use of PAPSS to import or ex- port goods and services can expect near- instant payments, reduced FX costs, and improved working capital.

PAPSS also makes it easier to send re- mittances to family across borders, make payments related to travel and tourism in local currencies, and for freelancers and remote workers, receive payments from clients in other African countries.

Because it eliminates reliance on for- eign currency to settle trade transactions, PAPSS also enables central banks to opti- mise their foreign reserves and stabilise their local currencies.

By eliminating extra currency conver- sions, enabling instant settlements, and reducing other transaction costs, PAPSS is projected to generate savings of around $5bn annually. n

PAPSS enables instant cross-border payments in local currencies, cutting costs and boosting intra- African trade efficiency.

TRANSIT SCHEME AIMS TO RESHAPE AFRICAN TRADE

Afreximbank’s African Collaborative Transit Guarantee Scheme aims to overcome some of the barriers to intra-African trade, writes Stanley Obinna.

Some of the factors that have, over the years, hindered Africa’s intra-continental trade potential include bottlenecks at borders, complex transit systems, and heavy reliance on foreign currencies for cross-border payments. These, coupled with growing geopolitical tensions and increasing adoption of isolationist trade policies, are forcing policymakers on the continent to re-strategise and adopt new models to support the continent’s development.

That is why, with its collection of initiatives such as the Afreximbank African Collaborative Transit Guarantee Scheme (AACTGS) and the Pan-African Payment and Settlement System (PAPSS), Afreximbank is reshaping how goods and money move across the continent, in the hope of eliminating constraints and catalysing a new era of economic integration.

The AACTGS is unlocking the movement of goods across multiple African countries by addressing the costly and time- consuming barriers that discourage traders from expanding across borders.

By providing a continent-wide transit guarantee mechanism, the AACTGS replaces the need for individual national guarantees and simplifies logistics across corridors, particularly for landlocked countries. The goal: lower trade costs, faster delivery, and greater confidence among small and medium-sized enterprises (SMEs) to participate in intra- African commerce.

Additionally, the AACTGS was designed to promote the movement of goods across multiple national customs borders, as a means of improving efficiency and shortening the time for border clearances.

The $1bn collaborative guarantee scheme is expected to accelerate cross-border trade in Africa and save the continent about $300m annually in transit costs. It is being implemented in partnership with the AfCFTA Secretariat as well as Africa’s regional economic communities.

Since its 2021 launch, AACTGS has gradually expanded, with notable pilot successes covering multiple borders and goods. National customs bodies, insurers, and the AfCFTA Secretariat are aligning to support a continental framework and IT infrastructure.

Denys Denya, Senior Executive Vice President at Afreximbank notes that the pan-African bank’s experience could be leveraged to chart a path for the continent’s future.

 “Africa is at a crossroads and a point where we need to be intentional about our aspirations and determined in our collective purpose to shape the future,” Denya says.

For Ibrahim Gerarh Umaru, of the Department of Economics at Kaduna State University, the AACTGS could be a game-changer. “By pooling risks with local insurers, such as Zambia’s IGI, and offering bank-backed guarantees, the scheme makes transit bonds more affordable and accessible for SMEs and freight operators.

“However, challenges persist. Regulatory fragmentation across countries, weak transport infrastructure, and poor digital readiness limit impact. Despite a $1bn funding target, actual bond issuance remains modest.

“For full-scale success, AACTGS must integrate with systems such as PAPSS, harmonise customs protocols, and enhance trust through stronger insurer capacity and digital cargo tracking,” he adds.

According to him, moving forward, priority actions should include standardising customs and automating documentation; investing in infrastructure and digital systems; training national insurers; and aligning with other AfCFTA trade facilitation tools.

Deepened public-private collaboration at borders is also essential, he says.

“In summary, AACTGS is a bold innovation with transformative potential. It addresses long-standing logistical and financial barriers to regional trade. With sustained political will, regulatory alignment, and digital investment, the scheme can significantly accelerate the realisation of Africa’s intra-continental trade ambitions.

“For Nigerian exporters – especially members of the Manufacturers Association of Nigeria (MAN) Export Group – the scheme offers significant benefits: reduced clearance times, fewer intermediaries, and improved access to African markets. Nigeria’s leadership in implementing AACTGS can position it as a trade hub in the region,” he concludes.

The executive secretary of the Manufacturers Association of Nigeria Export Group, Benedict Obhiosa, says the scheme addresses challenges by supporting importers and exporters in moving goods through transit without incurring customs duties or experiencing unnecessary delays, provided they present the transit guarantee to customs authorities. The goal is to make it easier to move goods across the African continent and support the goals of the AfCFTA.

“The main challenge in Africa is that very few regional economic communities are fully implementing their regional transit guarantee schemes,” he adds.

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