Platform Set To Launch Currency Market, Allows Traders Exchange Currencies Directly Without USD
- PAPSS has declared its intention to introduce an African currency market this year
- The platform will eliminate the need for third-party intermediary currencies like the USD
- This will help to solve the problem of repatriating funds across borders is challenging for many African firms
Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.
To boost cross-border trade throughout the continent, the Pan-African Payments and Settlement System (PAPSS) has announced plans to launch a currency market for African currencies this year.
With the name tag, "The Africa Currency Marketplace," the platform will allow traders to exchange currencies directly, doing away with the need for third-party intermediary currencies like the USD, according to Mike Ogbalu, CEO of PAPSS.
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“Our system will intelligently match them, and then party A will get Naira in Nigeria, and party B will get birr in Ethiopia. The transaction just completes without any third-party currency being involved at all,” Ogbalu told Reuters.
He added, “The rates will be market-driven, and our system is able to do a matching based on the rates offered by different participants in our ecosystem.“
Solution to cross-border currency challenges
Reuters reported that the inefficiency of currency systems, which makes smooth transactions more difficult, has been a significant obstacle to the establishment of the African Continental Free Trade Area (AfCFTA). Repatriating funds across borders is challenging for many African firms due to FX illiquidity.
Due to foreign exchange constraints, Dangote Cement and Ethiopian Airlines were forced to complete a $100 million currency swap agreement in 2023. Dangote Cement had $300 million blocked in Ethiopia at the time, while Ethiopian Airlines had $180 million stuck in Nigeria.
Although forex restrictions have been lessened because to changes in Ethiopia, Egypt, and Nigeria, problems still exist throughout the continent. Fintech businesses like Yellow Card have stepped in as a result, using cryptocurrencies to facilitate cross-border payments.
According to reports, Yellow Card handled $3 billion in transactions in 2024 and helps more than 30,000 businesses around Africa. Throughout Africa, PAPSS has integrated with over 150 commercial banks and 15 central banks.
By decreasing dependency on foreign currencies and promoting a more cohesive African trade ecosystem, the Africa Currency Marketplace seeks to offer a long-term solution for cross-border trade.
Meanwhile, Legit.ng reported that the value of Nigerian currency has crashed further against the US dollar, euro, and British Pound in the official and unofficial foreign exchange market.
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According to data from the Central Bank of Nigeria at the end of trading at the Nigerian Foreign Exchange Market (NFEM) naira fell to 1,535.73/$1 on Tuesday, March 11.
Tuesday's exchange rate showed that the Nigerian currency lost 0.22% or N3.44 compared to the closing rate of N1,532.29/$1 on Monday, March 10.
CBN begins new FX trading system
Legit.ng reported that On Monday, December 2, 2024, the Nigerian currency rose against the US dollar in the parallel market as the first FX trading day began on the Electronic Foreign Exchange Matching System (EFEMS) through the Bloomberg BMatch System.
The naira gained N20 as the US greenback traded at N1,730 against N1,750 on Friday, November 29, 2024, in the parallel market.
Last week, the Central Bank of Nigeria (CBN) issued a directive asking all banks operating in the interbank foreign exchange market to move to the Bloomberg BMatch System for FX trading.
