The African Export-Import Bank (Afreximbank), based in Cairo, has initiated a review of Kenya’s proposal to establish a Pan-African settlement house for intra-African trade agreements, reports indicate.
According to Denys Denya, the Executive Vice President for Finance, Administration, and Banking Services at Afreximbank, the trade financier’s highest governing body has formally considered Kenya’s application.
In July 2023, the Central Bank of Kenya Governor, Kamau Thugge, revealed Nairobi’s proposal to become the host for the Pan-African payment and settlement system (PAPSS). This system plays a vital role in enabling intra-African payments across various national currencies on the continent.
“The Kenyan government has decided to support the rollout of PAPSS. The President of Kenya, William Ruto, is actually championing this,” Mr Denya told reporters on the sidelines of a roadshow ahead of the third Intra-African Trade Fair (IATF2023) to be held in Cairo between November 9 and 15 2023.
“There’s a governance council that is considering that proposal. The decision will be made shortly and communicated.”
How PAPPS System Works
The PAPSS system allows a trader in a participating country to instruct their local bank to make a payment to a supplier in a different country using the supplier’s local currency.
Subsequently, her bank sends instructions to PAPSS to execute the payment through the local bank of the supplier, settling the transaction in the currency of the supplier’s jurisdiction in real-time.
PAPSS is responsible for conducting validation checks before transmitting the instructions to the recipient bank.
AfreximBank introduced the system in January 2022 after a trial phase involving six central banks in the West African Monetary Zone (WAMZ) that began in October 2021.
Dr. Thugge emphasized that a successful application to host the payment and settlement system would position Nairobi as a financial hub in the journey towards creating a unified, common market on the continent under the African Continental Free Trade Area (AfCFTA).
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