Say an Ethiopian business wants to pay a supplier in Nigeria. The money can pass through several correspondent banks, collecting fees and delays along the way. Africa built a system to shorten that journey. Now, its push for a continent-wide payment network has added another piece to the puzzle.
What happened? The National Bank of Ethiopia (NBE), the country’s central bank, has joined the Pan-African Payment and Settlement System (PAPSS). Ethiopian banks and licenced payment companies can now use PAPSS to send cross-border payments to financial institutions in other participating African markets.
Explain like I’m new here: In January 2022, the African Export-Import Bank (Afreximbank), the African Union, and the African Continental Free Trade Area (AfCFTA) Secretariat launched PAPSS.
It handles the payment between participating banks and fintechs, while central banks provide the framework for settling transactions in local currencies. Instead of an Ethiopian business paying a Nigerian supplier through a chain of banks outside the continent, the payment can move through an African network.
Why Ethiopia matters: Ethiopia already trades with the rest of Africa, but there is plenty of room for that trade to grow. In 2023, the country’s intra-African trade was about $2.48 billion, just 12.64% of its total trade. At 12.64%, payments are clearly not the only thing holding that trade back. But removing one more layer of cost and delay gives Ethiopian businesses fewer reasons to avoid African suppliers.
How big is this thing now? PAPSS has also expanded beyond the payment rail. Through the African Currency Marketplace, PAPSS lets businesses and financial institutions exchange participating African currencies, while PAPSSCard, its local card network, lets businesses make payments within the continent. PAPSS said it connects 30 African countries, 24 central banks, about 200 financial institutions and more than 16 payment switches—all spanning Nigeria, Ghana, Kenya, Tanzania, Uganda, and Zambia.
However, joining the network is only the beginning. Banks and fintechs still have to connect their systems and make PAPSS available to customers.
If you log in to apps such as Fidelity Bank, mild ads are laced across your screen, asking you to make payments to Kenya or Ghana. If PAPSS achieves its seemingly difficult goal of fixing intra-African payments, merchants may no longer need to handle dollars.
