According to Mike Ogbalu, Chief Executive Officer of Afreximbank’s Pan African Payment and Settlement System (PAPSS), African businesses lose approximately $5 billion each year due to levies, payments, and other costs associated with intra-African trade restrictions.
He made the remarks at the Nigerian American Chamber of Commerce‘s (NACC) breakfast meeting in Lagos, which was themed “One Year of AfCFTA (Opportunities, Challenges, and the Nigerian-American Partnership).”
According to him, 80 percent of payments destined for somewhere else on the continent must first travel somewhere else before arriving at their final destination, explaining why intra-African trade remains low at 15 to 18 percent.
Africa trades with the rest of the world more than it trades with itself, he continued.
“We will not support intra-African trade if payment must still go halfway around the world to someplace else across the world before returning to the continent.”
“No one who wishes to go from Lagos to Accra goes to New York or London first before arriving in Accra.” Why should money move in that direction and then stifle trade on the continent? We don’t even make calls that way.
“Payment, information asymmetry, dealing with trust concerns are all part of it,” he said, emphasizing that “someone needs to attempt to invest to solve some of these obstacles.”
He claimed that PAPSS would guarantee quick payment and settlement transactions since it would be based on a centralised infrastructure that could connect all countries.
“PAPSS is a central market infrastructure that supports multilateral settlement so that everything that is settled between countries is established through a standard framework across the continent,” he explained.
“We’ve also built it to be adaptable, so they can connect to national systems, regional systems, and commercial banks directly.” He went on to say, “It was built on proven technology, it’s instant, and it’s in local money.”
He claims that the desire for third-party global currencies is eroding African currencies, necessitating the necessity for technology that starts and ends in local money.
“We’ve connected the Central Banks of Nigeria, Ghana, Gambia, Guinea, and Sierra Leone, and real transactions are already flowing between them,” he continued.
Former Director General of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), John Isemede, also spoke at the event and praised Afreximbank’s PAPSS, but said Nigeria lacked the structure to engage with the platform.
He claims that a substantial percentage of the parties put up to process the facilitation of the AfCFTA are not in the business of doing business, and that this is one of the reasons Nigeria lags behind in terms of creating trade policy.
Nigeria has signed around 600 agreements since 1960, according to him, but none of them are related to foreign trade policies.
Deputy President Thomas Tunbosun, speaking on behalf of NACC President Dame Adebola Williams, said Nigeria has failed to use the opportunities available to it, adding that the country has mainly underperformed in implementing the African Growth and Opportunity Act (AGOA).
He also stated that after a year of full implementation of the AfCFTA, there is an obvious need for a review.
“That is why, as a vital fulfillment of the chamber’s members’ expectations, we have arranged the forum.” We will continue to broker healthy interactive fora between our members and the relevant facilitating regulatory organizations, both governmental and private sector bodies, capable of delivering beneficial information to our members who are currently in the export business,” he added.