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The Regulatory Framework Governing the PAPSS System in Nigeria

The Regulatory Framework Governing the PAPSS System in Nigeria

The Pan-African Payment and Settlement System, PAPSS, framework was created by the Afreximbank in collaboration with the West African Monetary Institute (WAMI) as a test-run initiative and was introduced in Nigeria by virtue of the Central Bank of Nigeria CBN Guidelines passed on October 11, 2021.

This article will be talking about this payment system that is actually geared towards seamless electronic payments across borders and the main focus areas will be :-

What are the objectives of the PAPSS payment framework?

The PAPSS framework was created for the sole objective of achieving faster settlements and payments in support of cross-border transactions within Africa at a reduced cost with the aim of significantly boosting Intra-African trade.

What are the features of the PAPSS payment framework?

The features of the PAPSS payment framework are as follows :-

  • The option of supported initiation of cross-border retail payments in local currencies of sending parties and the receipt of funds in the local currencies of beneficiaries within West Africa while Inter-Bank settlements will be in US Dollars based on a multilateral netting arrangement.
  • The net settlement model which defines the PAPSS payment framework is based on prefunding by participating financial institutions through the domestic RTGS system.
  • The Afreximbank will be the settlement agent and each Central Bank of signatory states under the PAPSS arrangement will maintain a US Dollar settlement account with it to settle eligible transactions from its country on a net basis.
  • Each central bank shall determine eligible transactions for which they will provide foreign exchange.
  • Commercial banks may maintain a US Dollar settlement account with the Afreximbank to settle obligations for payments that may fall outside the eligible transactions for which the central bank will not provide foreign exchange.

What are the implications of the CBN Guidelines on the PAPSS payment framework for authorised dealers in Nigeria?

The CBN Guidelines on the adoption and operation of the PAPSS payment framework in Nigeria have the following implications for authorised dealers :-

  • The eligible payment of imports and the receipt of export proceeds by the CBN shall be restricted to trade-backed transactions.
  • Export proceeds repatriated to the CBN under the PAPSS framework shall be subject to certification by respective processing banks as being repatriated by the exporter.
  • The provisions of all existing guidelines, circulars and directives on the operations of the foreign exchange market shall apply.
  • For the settlement of PAPSS transactions by the CBN, authorized dealers shall obtain CBN approval for US Dollar covers before initiating payments on the framework. The request for PAPSS transaction settlement should be forwarded to the CBN.
  • Only transactions deemed eligible by the CBN shall qualify for payments via the PAPSS framework. Items classified as “not valid for foreign exchange” shall remain ineligible.


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