A Quiet Revolution in Abuja
Behind the ceremonial photographs taken on 25 June 2025 in Abuja, the Pan-African Payment and Settlement System (PAPSS) unveiled what its architects call the African Currency Marketplace, an electronic bazaar through which importers in Lagos may settle invoices in naira while exporters in Kigali receive Rwanda francs within seconds. Sponsored by Afreximbank, in concert with the African Union Commission and the AfCFTA Secretariat, the project seeks to erode the hegemony of third-party hard currencies in African trade. In the words of Afreximbank president Benedict Oramah, the Marketplace is designed to “make the Washington Consensus irrelevant to the smallest trader in Goma”.
The Dollar Drawback: Counting the Costs
According to UNCTAD, almost 80 percent of intra-African commerce is paradoxically settled in dollars or euros, imposing an estimated annual cost of six billion dollars in conversion spreads and correspondent-bank fees. Those costs disproportionately affect small and medium-sized enterprises that lack access to sophisticated treasury desks, thereby diluting one of the AfCFTA’s core promises, namely the democratisation of cross-border commerce. The International Chamber of Commerce notes that a payment routed from Accra to Cotonou routinely makes a detour through New York, adding at least forty-eight hours to settlement times. By hosting bilateral currency quotes on a single continental order book, PAPSS hopes to compress both time and expense.
Architecture of the Marketplace
Technically, the Marketplace is layered atop PAPSS’s existing real-time gross-settlement rails. Commercial banks post two-way quotes in their domestic currencies, with Afreximbank providing a net settlement line through a multi-currency escrow. Central banks, in turn, manage end-of-day positions, an arrangement modelled loosely on the CLARA mechanism in Latin America. Early trials in the West African Monetary Zone cleared transactions in under two minutes, though settlement in the Central African CFA remains contingent on the Banque de France’s approval. While the platform is marketed as ‘currency agnostic’, its pilot phase will concentrate on a basket of twelve widely traded units, from the Egyptian pound to the South African rand.
Regulatory Conundrums and Sovereign Egos
Yet the Marketplace’s success is not merely a question of code. The heterogeneity of exchange-control regimes across the continent presents a regulatory labyrinth. Nigeria operates a managed float, Ghana has embraced inflation targeting, and Ethiopia still practices administrative rationing of foreign exchange. Each framework interacts differently with an instantaneous multi-currency environment. The Central Bank of Kenya cautiously welcomed the initiative but insisted that capital-account liberalisation would remain “calibrated to domestic stability priorities”. Such caveats underscore a deeper truth: monetary sovereignty remains emotionally charged, particularly in jurisdictions that perceive local currency settlement as a strategic vulnerability.
Commercial Banks at the Crossroads
For commercial banks, PAPSS represents both an opportunity and a threat. On the one hand, reducing the reliance on correspondent networks promises lower compliance costs under the expanded FATF directives. On the other, foreign-exchange margins have historically been a lucrative revenue stream. A senior treasurer at a pan-African bank, requesting anonymity, confessed that “our New York nostro accounts pay for half the Christmas bonuses”. Whether they will voluntarily provide tight on-screen quotes in the Marketplace therefore depends on ancillary incentives, such as access to Afreximbank’s trade-finance guarantees. Early indications from Ecobank and Standard Bank suggest a willingness to participate, provided that liquidity support is robust.
Regional Precedents and Global Comparisons
Comparable schemes elsewhere offer cautionary tales. The Asian Clearing Union, active since 1974, still channels less than three percent of its members’ trade, hampered by uneven settlement discipline. By contrast, Europe’s TARGET2 handles ninety-six percent of euro-area wholesale payments but benefits from a common monetary policy. In Africa, the Common Market for Eastern and Southern Africa’s REPSS system has struggled to break beyond six central banks. PAPSS seeks to avoid these pitfalls by positioning Afreximbank as a neutral clearing authority with a balance sheet large enough to absorb intraday shocks. Fitch Ratings recently opined that Afreximbank’s callable capital of 6.5 billion dollars “provides a credible lender-of-last-resort role”, though it warned of the bank’s rising exposure to sovereign risk.
What Success Could Mean for the AfCFTA
Should the Marketplace attain scale, the implications reach far beyond transaction costs. Local-currency invoicing would insulate African trade from the Federal Reserve’s tightening cycles, thereby stabilising price discovery for agricultural staples and manufactured inputs. Moreover, enhanced monetary cooperation may lay pragmatic groundwork for the long-discussed African Monetary Institute. Still, even proponents concede that the path to critical mass is steep. Economists at the African Development Bank estimate that the platform must capture at least twenty-five percent of intra-continental settlements to become self-sustaining. Achieving that figure will require more than technology; it demands a delicate choreography of political trust and macroeconomic discipline.
