In a decisive move aimed at fostering deeper economic integration and streamlining financial transactions across the African continent, the Central Bank of Nigeria (CBN) has mandated that all banks operating within the nation fully adopt the Pan-African Payment and Settlement System (PAPSS) and commence originating transactions under its framework. This directive signals Nigeria's strong commitment to bolstering intra-African trade and significantly improving the efficiency of cross-border payments.
The CBN's Acting Director of Corporate Communication, Mrs Hakama Sidi Ali, announced this pivotal development on Monday. The directive follows the apex bank's recent announcement of a significant overhaul of the documentation prerequisites for PAPSS transactions within Nigeria, indicating a concerted effort to facilitate broader participation in the system.
Further details were outlined in a circular issued on April 28, 2025, referenced TED/FEM/PUB/FPC/001/006. This circular articulates key modifications designed to incentivize greater engagement with PAPSS by Nigerian banks, exporters, importers, and individual users, paving the way for a more seamless and cost-effective cross-border payment landscape.
Launched in January 2022 through a collaborative effort between Afreximbank, the African Union, and the African Continental Free Trade Area (AfCFTA) Secretariat, PAPSS stands as a centralized infrastructure designed to enable instant, secure, and efficient cross-border payments across the African continent. A key advantage of PAPSS lies in its ability to facilitate payments in local currencies, thereby diminishing the reliance on intermediary currencies such as the U.S. dollar. This localization of payments is expected to significantly reduce transaction costs, enhance transparency, and provide crucial support for the expansion of trade activities under the AfCFTA agreement.
Key Changes Under the New CBN Policy
The CBN has introduced several key changes to facilitate the adoption and utilization of PAPSS within Nigeria. A significant highlight is the simplification of documentation requirements, particularly for lower-value transactions. Individuals undertaking transactions up to $2,000 (or its Naira equivalent) and corporate entities dealing with amounts up to $5,000 (or its Naira equivalent) will now be able to utilize basic Know Your Customer (KYC) and Anti-Money Laundering (AML) documentation that has been previously submitted to their Authorized Dealer Banks (ADBs). However, for transactions exceeding these thresholds, the CBN has clarified that all existing documentation requirements as stipulated in the CBN Foreign Exchange Manual and other relevant circulars will remain mandatory, ensuring continued regulatory compliance for larger financial flows.
The circular also places the onus on applicants to ensure that all necessary regulatory documents for the clearance of goods are provided to the relevant government agencies, underscoring the importance of adherence to established trade regulations alongside the adoption of the new payment system.
In a strategic move aimed at fostering a more market-driven approach to foreign exchange sourcing, the CBN has granted Authorized Dealer Banks the autonomy to source foreign exchange for PAPSS settlements directly from the Nigerian Foreign Exchange Market, without the need for direct recourse to the CBN. This measure is expected to enhance efficiency and potentially improve access to foreign currency for cross-border transactions within the PAPSS framework.
Furthermore, the CBN has mandated that all export proceeds repatriated through PAPSS must undergo due certification by the processing banks. This requirement is designed to ensure strict compliance with existing export regulations and promote transparency in international trade transactions.
The apex bank has strongly encouraged exporters, importers, and individual participants in cross-border trade to familiarize themselves thoroughly with these revised requirements and to actively leverage the PAPSS platform for their transactions. The CBN emphasized that this initiative is poised to significantly enhance financial inclusion and improve overall operational efficiency for businesses and individuals engaged in trade within the African continent.
The full circular and comprehensive details regarding the revised documentation requirements are readily accessible through the official Central Bank of Nigeria website, providing stakeholders with the necessary resources to navigate the new framework effectively.
Implications of the CBN's Directive
The CBN's latest directive signifies a determined push to fully integrate Nigerian banks and businesses into the burgeoning Pan-African payment ecosystem. By actively promoting the adoption and use of PAPSS, the regulatory body aims to achieve several key objectives. Primarily, it seeks to strengthen intra-African trade flows by reducing the traditional barriers associated with cross-border payments, such as high transaction costs and lengthy processing times.
Moreover, the implementation of PAPSS is expected to diminish Nigeria’s reliance on dominant foreign currencies like the U.S. dollar for regional trade settlements. By facilitating transactions in local currencies, the system aims to insulate businesses from exchange rate volatility and foster greater economic stability within the African trade landscape.
For Nigerian banks, this directive necessitates adjustments to their existing payment infrastructure to seamlessly originate and process PAPSS transactions in strict adherence to the newly defined documentation guidelines. This may involve system upgrades, staff training, and the establishment of robust internal processes to ensure compliance.
Exporters and importers stand to gain significantly from the faster and more cost-effective transaction settlements facilitated by PAPSS, particularly when dealing in local currencies. However, they must remain vigilant in ensuring full compliance with the simplified or comprehensive documentation requirements, depending on the value of their transactions.
Overall, the mandatory adoption of PAPSS in Nigeria is anticipated to make cross-border payments more accessible, efficient, and cost-effective for Nigerian businesses and individuals actively engaged in trade and financial interactions within the African continent, paving the way for stronger economic partnerships and growth across the region.