By Ayomide Otitoju
FirstBank and the Pan-African Payment and Settlement System (PAPSS) are helping to simplify cross-border payments across Africa by enabling businesses and individuals to transact using local currencies.
For years, transferring money between Nigeria and other African countries has been costly and time-consuming, with transactions often requiring currency conversions and correspondent banks outside the continent.
For example, a Nigerian exporter selling goods to a buyer in Ghana could convert naira to US dollars before the payment passed through correspondent banks and was eventually converted into Ghanaian cedis. The process could attract multiple fees and delays.
PAPSS was established to address these challenges by providing a platform for faster cross-border payments and settlements in African currencies.
Developed by Afreximbank and the African Continental Free Trade Area (AfCFTA), PAPSS is a centralised financial market infrastructure designed to facilitate instant or near-instant payments between participating African countries.
The system was officially launched in January 2022 and allows businesses and individuals to send and receive money in local currencies without relying entirely on third-party currencies.
Under the arrangement, a trader in Kenya can pay a Nigerian supplier in Kenyan shillings while the recipient receives naira, with PAPSS facilitating the settlement between participating financial institutions.
PAPSS currently operates in 28 African countries, including Nigeria, Ghana, Liberia, The Gambia, Guinea, Sierra Leone, Kenya, Zimbabwe, Zambia, Tanzania, Uganda, Malawi, Gabon, Guinea-Bissau, Cameroon, Rwanda, Algeria, Egypt, Morocco and Djibouti.
The 15 member states of the Caribbean Community (CARICOM) also joined the PAPSS network in October 2023.
A significant development for Nigerian banks occurred on March 12, 2024, when the Central Bank of Nigeria replaced the SSA-1 model with the SSA-3 framework.
The new framework allows commercial banks such as FirstBank to maintain and fund their own US dollar settlement accounts with Afreximbank. While banks provide the foreign exchange required for settlement, PAPSS facilitates transactions in local currencies and settles net positions between participating banks.
The arrangement is expected to support larger-scale intra-African trade by making cross-border transactions more efficient.
FirstBank has integrated PAPSS into its LIT App, FirstMobile and FirstOnline platforms, allowing customers to make cross-border payments in local currencies across participating African markets.
Customers can access the service through the bank’s digital channels without separate onboarding, subject to applicable regulatory requirements.
Individuals can transact through the digital channels up to the local currency equivalent of $2,000 per month, while corporate customers can transact up to $5,000 per month, using the basic Know Your Customer and anti-money laundering documentation permitted under the CBN’s PAPSS framework.
Transactions above these limits can be processed at FirstBank branches upon submission of the required foreign exchange documentation.
PAPSS offers lower costs and faster settlement compared with traditional cross-border payment channels. Transaction fees are capped at $16, while payments can be completed within minutes and are available 24 hours a day.
By reducing reliance on multiple correspondent banking intermediaries, the platform seeks to lower transaction costs and minimise delays associated with cross-border payments.
The development comes as African countries deepen efforts to promote economic integration under AfCFTA, with efficient payment systems regarded as critical to expanding intra-African trade.
PAPSS enables businesses and individuals to transfer funds across participating countries in local currencies, potentially reducing costs, simplifying transactions and improving settlement times.
For Nigerian small and medium-sized enterprises, the system could make it easier to access markets such as Ghana, Kenya and other participating countries without relying on complex traditional payment arrangements.
The platform could also strengthen financial inclusion and economic integration while helping banks maintain their relevance in an increasingly interconnected African market.
However, PAPSS still faces challenges, including transaction limits, documentation requirements and the need to build greater confidence among businesses accustomed to using foreign currencies for international trade.
Transactions above the applicable digital limits require additional foreign exchange documentation and processing through bank branches.
Despite these limitations, the expansion of PAPSS and its integration into banking platforms such as FirstBank’s digital channels are creating a more direct route for cross-border payments and trade within Africa.
The development could help businesses and individuals replace lengthy and costly settlement processes with faster transactions conducted in African currencies.
