NAIROBI, Oct. 29 — A growing number of African banks and businesses are routing cross-border payments through a continent-wide settlement system designed to allow trade in local currencies, a shift backers say is steadily reducing the cost and delay of commerce within the region.
The Pan-African Payment and Settlement System, developed to support the African Continental Free Trade Area, now links central banks and commercial lenders across more than two dozen countries, enabling a transaction between a buyer in one nation and a seller in another to be settled in their respective currencies rather than through intermediary dollars.
Proponents argue that cutting reliance on third-party currencies lowers fees that have long made intra-African trade more expensive than commerce with distant continents. The AfCFTA, once fully implemented, is projected by the African Union to lift intra-continental trade by roughly a third over the coming decade by removing tariffs on most goods moving between member states.
Rollout remains uneven. Several of the continent’s largest economies have joined the payment link, but uptake among smaller enterprises has been slowed by limited awareness, legacy banking systems, and a lingering preference for established correspondent banking. Regulators in a handful of countries are still aligning rules on capital movement and foreign-exchange reporting.
Economists caution that the payment system alone will not erase deeper frictions — poor roads, overlapping standards, and border delays still weigh on the cost of moving goods. Yet the symbolic and practical move toward settling trade in African currencies is seen in many capitals as a step toward the deeper integration the trade pact envisions.
Officials say the next phase will focus on extending connectivity to more financial institutions and adding settlement in a broader set of currencies, with pilot programmes underway in agricultural and manufactured-goods supply chains.
— VGMG Africa Macro & Trade Finance Desk