FirstBank has deepened its integration with the Pan-African Payment and Settlement System (PAPSS) to facilitate real-time cross-border payments and reduce the reliance on hard currencies for intra-African trade.
The move is part of a broader strategic effort by the lender to capture a larger share of the cross-border payment market as African nations seek to implement the goals of the African Continental Free Trade Area (AfCFTA).
PAPSS is a centralized financial market infrastructure launched in January 2022 by Afreximbank and the AfCFTA Secretariat. It is designed to allow traders across the continent to transact in their local currencies, removing the need for a common third-party currency such as the US Dollar or Euro.
Under the current PAPSS framework, a Nigerian importer can pay for goods from a Ghanaian exporter in Naira, while the Ghanaian exporter receives the payment in Cedi. The system handles the settlement behind the scenes, significantly reducing the time and cost associated with traditional currency conversion.
The adoption of PAPSS by major commercial banks like FirstBank is intended to address the historical inefficiencies of the “correspondent banking” model. For decades, most payments between African countries have had to pass through banks in New York, London, or Paris, adding layers of fees and delaying settlement times.
Reducing Dependence on Hard Currencies
The financial implications of this shift are substantial. Afreximbank estimates that the cost of remittance and cross-border payments in Africa reaches approximately $5 billion annually.
By bypassing the need for hard currencies, PAPSS aims to lower these costs and reduce the immense pressure on foreign exchange reserves in countries facing currency volatility, including Nigeria.
The race to own the “payment rails” in Africa has intensified as traditional banks compete with emerging fintech platforms. While fintechs have focused on retail P2P transfers, legacy institutions like FirstBank are leveraging their balance sheets and regulatory relationships to dominate the B2B trade settlement space.
For SMEs, the integration of these rails means faster access to markets across the continent. Reduced transaction costs and faster settlement cycles directly improve the working capital cycles for small-scale manufacturers and traders who previously found cross-border trade prohibitively expensive.
The success of the system relies heavily on the cooperation of national central banks. The Central Bank of Nigeria and other regional regulators must ensure that the necessary liquidity and regulatory frameworks are in place to support local currency settlements.
Industry analysts suggest that as more commercial banks onboard onto the platform, the liquidity of local currencies for trade purposes will increase, potentially stabilising exchange rates for intra-African transactions.
FirstBank’s participation signals a shift in how Tier-1 banks view the AfCFTA, moving from theoretical support to the implementation of technical infrastructure that enables actual trade flow.
The next phase of implementation involves expanding the number of participating central banks and integrating more diverse payment methods into the PAPSS ecosystem to ensure seamless adoption by smaller financial institutions across the continent.
Explore more Money stories and analysis from Business Elites Africa.
