PAPSS adoption — Afreximbank's payment system and the slow rewriting of African trade settlement

<p>The Pan-African Payment and Settlement System (PAPSS), launched commercially by Afreximbank and the African Union in January 2022, is a real-time gross settlement platform allowing African banks to settle intra-African trade payments in local currencies, with PAPSS performing the FX clearing centrally. The intent is structural: African trade currently moves through correspondent banking relationships that route African-to-African payments through New York or London in US dollars, paying intermediation fees and absorbing FX spreads twice. PAPSS aims to remove the dollar leg.</p> <p>Three years in, the adoption picture is partial. PAPSS has signed up the central banks of all eight ECOWAS member states (plus Cape Verde and Sao Tome and Principe by 2024), the COMESA Clearing House members, and selected institutions in southern Africa. Commercial banks numbering above 150 had signed integration agreements by end-2024. Actual transaction volumes, however, remain small — Afreximbank reported aggregate flows of approximately USD 2 billion processed through PAPSS in 2024, against total intra-African trade estimated at USD 200 billion. The penetration is roughly 1%.</p> <p>The slow ramp is not surprising. Correspondent banking has institutional inertia: relationships, compliance procedures, and counterparty credit lines built over decades cannot be replaced by a platform launch. The PAPSS value proposition — settlement in local currency, lower fees, faster clearing — has to be demonstrated transaction by transaction before treasury departments at commercial banks shift volume. Beyond that, PAPSS depends on participating central banks holding sufficient inter-central-bank credit lines to handle the net settlement positions that emerge from imbalanced trade flows. The CBN, BCEAO, BEAC, and Bank of Ghana have been working through the operational details.</p> <p>The AfCFTA-Afreximbank linkage matters here. The AfCFTA Adjustment Fund, capitalised by Afreximbank with USD 1 billion in seed funding, is designed to ease the fiscal cost to smaller member states of tariff revenue loss under AfCFTA implementation. PAPSS is the settlement plumbing that lets AfCFTA actually function as a single market. Without it, AfCFTA&#x27;s tariff reductions deliver only part of the available efficiency gain — the settlement frictions remain.</p> <p>Howard French at Columbia has written about how African trade has been systematically under-integrated for institutional rather than economic reasons. PAPSS is a deliberate intervention against those institutional reasons. Its growth trajectory — whether it captures 10% of intra-African settlement by 2030, or stalls at the current 1% — will be one of the more important data points on whether AfCFTA&#x27;s promise translates into operational reality. The institutional momentum is there. The volume is not, yet.</p>