By Duncan Miriri and Karin Sthecker
Nairobi (Reuters) – A Pan -African payment infrastructure provider that is designed to facilitate trade on the continent is an African currency market platform to stimulate trade across borders in the region, the Chief Executive said.
The Pan-African payments and settlement system (PAPS), supported by 15 central banks on the continent, expects to add the platform later this year as a supplement to its payment infrastructure that says it is currently integrated with 150 commercial banks.
“The rates will be market -driven and our system is able to match based on the rates offered by the various participants in our ecosystem,” Mike Ogbalu, the CEO of Papss, told Reuters in an interview from Cairo.
The currency markets of Africa are often shallow and liquidity is limited, in which South Africa and Nigeria geographically dominate and much of the wider trade centered around local and hard currencies. Those Seeking Other African Currencies Must Typically Secure Dollars First.
However, the region has also seen some important currency reforms with countries such as Nigeria, Egypt and Ethiopia that push efforts to move to more market-based regimes.
He quoted the example of an Ethiopian airline who sells tickets in Nigeria purchased by Niira, who was then able to trade in his Naira income with a Nigerian company acting in Ethiopia with the help of the Birr.
“Our system will match in an intelligent way and then Party A Naira will get in Nigeria and Party B gets Birr in Ethiopia. The transaction has just been completed without a currency of third parties being involved,” Ogbalu said.
There are frequent case that companies cannot repatriate their income from other countries in the region when violence or economic problems cause dollar shortages in markets such as South Sudan or the Central African Republic.
Companies that are active in the region are forced to take a written written every financial year to take currency recovers in markets with volatile currency, Ogbalu said.
Attempts have been made to use cryptocurrencies such as Bitcoin to circumvent that problem, but their use is still low, partly due to a lack of legal frameworks to support their use in markets such as Kenya.
“Those are some of the things that we think this African currency market will unlock,” he said, saying that it would be “transformational” without giving details about the expected size or trade volumes.
