By Duncan Miriri and Karin Strohecker
NAIROBI (Reuters) – A supplier of Pan -African payment infrastructure designed to facilitate trade on the continent pilot a market of African currency market to stimulate trade through the borders of the region, said its director general.
The Pan-African payment and settlement system (PAPS), supported by 15 central banks on the continent, plans to add the platform later this year to complete its payment infrastructure which, according to her, is currently integrated with 150 commercial banks.
“The prices will be focused on the market, and our system is able to make a correspondence according to the prices offered by the various participants of our ecosystem”, told Reuters Mike Ogbalu, CEO of Papss.
Africa’s exchange markets are often shallow and liquidity are limited, South Africa and Nigeria dominating geographically and a large part of the broader trade focused on local and hard pairs. Those looking for other African currencies must usually get dollars first.
However, the region has also experienced major currency reforms with countries such as Nigeria, Egypt and Ethiopia that are advancing with efforts to move on market -based diets.
The African currency market, as the platform will be known, will allow the parties to directly exchange local currencies, said Ogbolu.
He cited the example of an Ethiopian airline selling tickets made in Nairas in Nigeria, which could then exchange his income in Nairas with a Nigerian company merchant in Ethiopia using the BIRR.
“Our system will correspond to it intelligently, then the celebration will obtain nairas in Nigeria and the B party will obtain Birr in Ethiopia. The transaction ends without any third -party currency that is involved,” said Ogbalu.
It has been frequently that companies were unable to repatriate their income in other countries in the region, whenever violence or economic problems cause shortages in dollars on markets such as South Sudan or the Central African Republic.
The companies operating in the region have been forced to take a depression each exercise to take into account the revaluations of currency on the markets with volatile currencies, said Ogbolu.
Others have invested in assets such as real estate to try to preserve the value of their assets on such markets.
There have been attempts to use cryptocurrencies like Bitcoin to bypass this problem, but their use is always low, partly due to the lack of legal frameworks to support their use on markets like Kenya.
“These are some of the things we think that this African currency market will unlock,” he said, saying that it would be “transformational” without giving details on the expected size or trading volumes.
(Report by Duncan Miriri and Karin Strohecker; edition by Christina Fincher)
