The Nigerian Exchange Limited on Tuesday signed a Memorandum of Understanding with the Pan-African Payment and Settlement System for the facilitation of transactions on securities trading across the continent.
PAPSS, developed by the African Export-Import Bank (Afreximbank), is a cross-border financial infrastructure designed to enable payments across the African continent.
PAPSS is designed to enable payments for intra-African trades in local currencies using central banks as settlement agents.
The MoU is designed to facilitate efficient and seamless cross-border payments across Africa’s capital markets.
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Under the MoU, PAPSS will facilitate the payment and settlement of transactions in countries of operation, starting with cross-border transactions between the NGX and the Ghana Stock Exchange, according to Alhaji Umaru Kwairanga, chairman of the NGX Group Limited.
He said the system will facilitate the ongoing efforts to integrate African capital markets through the African Exchange Limited Project.
“This is a home-grown solution to the issue of fragmented and shallow capital markets and inefficient payment systems that have held down the capital market formation and development in the continent,” he noted.
The MoU will help in reducing transaction costs and risks associated with trading in securities, according to Abubakar Mahmood, chairman of the NGX, in his welcome speech at the virtual event.
He said by signing the MoU, the NGX and PAPSS were moving toward creating a more efficient market system that will enable them to unlock the potential of Africa’s capital markets.
On his part, Lamido Yuguda, the chairman of Nigeria’s Securities and Exchange Commission, described the event as “significant,” noting that it was in line with the strategic objectives of facilitating an integrated African capital market, which is encapsulated in the commission’s masterplan, 2021-2025, that was modified in 2022 to accommodate innovative changes in the country’s capital markets.
Professor Benedict Oramah, president of Afreximbank, in his closing speech, noted that about six years ago, he was acquainted with the plans by the African Stock Exchanges Association to link up exchanges in the continent.
“It was like a very good dream that should be pursued in those days. I am very pleased today that the dream has become reality at a very opportune time.”
He said Afreximbank has put a $3 billion facility to provide the settlement under the PAPSS arrangement, adding, “That funding will be available to support this initiative.”
On his part, Oscar Onyeama, the CEO of the NGX Group Limited, said the MoU will contribute to the goals of AcFTA by eliminating barriers to trade and embracing technology “as a tool to accelerate intra-regional trade.”
Presenting an update on the development of PAPSS, Mike Ogbalu said nine central banks and over 50 commercial banks have joined the payments system.