The Central Bank of Nigeria (CBN) has directed commercial banks to apply the exchange rate in the Investors and Exporters (I&E) Window for outbound payments through the Pan African Payments and Settlement System (PAPSS).

The apex bank, however stated that only eligible transactions as may be determined by the central bank from time to time shall be eligible for payment on PAPSS.

It stated that items classified as ‘Not Valid for Foreign Exchange,’ particularly the over 41 items banned from accessing FX at the official window, shall remain ineligible to benefit from PAPSS.

Developed by the African Export-Import Bank, (Afreximbank) in partnership with the West African Monetary Institute or WAMI, PAPSS is a centralised payment and settlement infrastructure for intra-African trade and commerce payments.

The project is expected to facilitate payments as well as formalise some of the unrecorded trade due to prevalence of informal cross-border trade in Africa.

It would further provide alternative to current high-cost and lengthy correspondent banking relationships to facilitate trade and other economic activities among African countries through a simple, low-cost and risk-controlled payment clearing and settlement system.

However, the apex bank in a circular on the Guidelines on Operations of PAPSS in Nigeria, which was signed by the CBN Director, Trade and Exchange Department, Dr. Ozoemena Nnnaji, stated:

All authorised dealers are required to ensure that prevailing exchange rate at Investors and Exporters Forex Window as advised by Financial Markets Department, FMD, should be used in cross-rates conversion between Naira, United States Dollars and third currencies within Africa, for outbound payments and vice-versa for inflows.

It added:

For settlement of PAPSS transactions by CBN, authorised dealers shall obtain the approval of CBN for dollar cover, before initiating payments on PAPSS.

The request for approval should be forwarded to the Director, Financial Markets Department, CBN.

That eligible payment of imports and receipt of export proceeds by the CBN shall be restricted to trade-backed transactions only and that the documentation requirements stipulated in Memorandum 9 and 10 of the Foreign Exchange Manual (2018) and other extant circulars shall apply. Import payments shall also be restricted to goods of African origin,

the bank stated.

The circular further noted that all the required documentation referred to should be provided before a transaction is initiated on PAPSS by authorised dealers and their customers.

It also clarified that export proceeds repatriated to CBN under PAPSS shall be subject to certification by respective processing banks as being repatriated by the exporter adding that the provisions of all existing guidelines, circulars and directives on the operations of foreign Exchange market shall apply.

Earlier in June, the Secretary-General of the African Continental Free Trade Area Agreement (AfCFTA) Secretariat, Mr. Wamkele Mene, had indicated that the full implementation of PAPSS would cut annual costs of transactions by $5 billion, adding that that this represented the aggregate amount spent on currency convertibility.

He had said the pilot implementation of the platform had already started and running smoothly in six countries in West Africa, which had switched on unto the system.

He had told Flavision that it would be difficult to boost intra-African trade with 42 currencies of various countries, thus, this need for currency convertibility.

He expressed confidence that full implementation of the pan-African payment platform will begin by December.

He said:

We have started a piloting phase of the Pan-African Payment and Settlement System (PAPSS); six countries in West Africa which have switched on unto the platform.

Justin Nwosu

Justin Nwosu is the founder and publisher of Flavision. His core interest is in writing unbiased news about Nigeria in particular and Africa in general. He’s a strong adherent of investigative journalism, with a bent on exposing corruption, abuse of power and societal ills.