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18th August 2021, International news
By: Norvisi Mawunyegah
The rise of digital currencies has sparked a lot of interest, with Ghana launching a trial programme for a digital currency called “e-cedi.” On a continental level, the Afreximbank and the AfCFTA are developing the Pan African Payment and Settlement Systems (PAPSS), which will provide a huge boost to intra-African commerce by easing cross-border payments. Cross-border traders that use PAPSS’ digital processes will no longer need to rely on third-party money to conduct business.
The significant AfCFTA, which was signed in March 2018, gives optimism for more intra-African trade and is linked to the African Union’s Agenda 2063 for trade liberalization and enhanced trade across the continent. While free movement of commodities and services is critical for improving intra-regional commerce, financial flows across borders are also critical.
While detractors have pointed to the inherent hazards and unrestricted nature of crypto currency as a form of payment in cross-border trade, the digital currency industry’s potential to enhance trade facilitation and lower transactional costs cannot be denied. If the necessary regulatory, trust, and policy institutions are in place, digital payment systems can make a significant impact in both formal and informal transactions. Digital money is a new business that has the potential to increase financial inclusion. States signatories to the AfCFTA should work to develop regulations that assure the oversight of digital currency, as it represents a realistic means of improving financial inclusion. Reaffirming the Vice President of Ghana Dr. Mahamadu Bawumia’s advice at the 5th GITFIC Conference, that the PAPSS framework be used to allow national banks of State Parties to connect in order to ensure seamless operational definition and financial integration.
To promote technology transfer, governments must support and invest appropriately in financial technology (fintech), particularly startup enterprises. Because cross-border trade across Africa has been shown to be predominantly informal, programmes to enhance institutional capacity among stakeholders and enterprises, particularly in the informal sector, are advised. Following the BOG’s announcement to test a digital currency, it is suggested that periodic impact evaluations be conducted and the results shared with the AfCFTA Secretariat and the continent’s monetary zones (for e.g.: West African Monetary Zone – WAMZ).
The AfCFTA protocols’ implementing agencies are required to perform periodic empirical research on the various modules in order to inform policy decisions. The AfCFTA should ensure and guarantee that at least 1% of all Transactional Revenues generated under the PAPSS are remitted to the Central Banks of the contracting State Parties.