For decades, Africa has grappled with the inefficiencies of cross-border payments, including high transaction costs and slow settlement times, often necessitating reliance on foreign currencies. This fragmentation has hindered trade, communication, and entrepreneurial expansion across the continent.
However, the Pan-African Payment and Settlement System (PAPSS), a development by Afreximbank in collaboration with the African Union and the AfCFTA Secretariat, is set to transform this landscape. PAPSS facilitates instant, low-cost transactions using local African currencies, eliminating the need for intermediaries like the US Dollar, Euro, or Pound.
FirstBank, a leading financial institution in West Africa, has embraced this innovation by integrating PAPSS into its digital banking platform, the LIT App. This integration allows customers to send and receive funds instantly, securely, and in their local currencies across various African countries directly from their mobile devices.
The adoption of PAPSS on the LIT App signifies a move towards making African borders less of a barrier for monetary transactions. It supports the vision of a more connected Africa where trade, family support, and entrepreneurship can flourish, driven by digital innovation and local currencies.
This development is particularly significant for financial inclusion, enabling more Nigerians to participate in cross-border trade and remittances using local currencies. Small and Medium Enterprises (SMEs) stand to benefit by expanding into new markets without the burden of costly currency conversions.
Furthermore, the integration aligns with the African Continental Free Trade Area (AfCFTA) objective of creating a unified African market by simplifying intra-African commerce. The LIT App, already known for features like virtual cards and scheduled payments, is enhanced to become a key enabler of pan-African commerce.
Nigeria's remittance market is substantial, with the country receiving close to $20 billion in 2024, while Africa as a whole attracted nearly $100 billion. Globally, remittance flows reached approximately $905 billion, with $685 billion directed to low and middle-income countries.
A significant portion of remittance activity occurs informally through peer-to-peer arrangements, where individuals with complementary needs match to exchange funds locally without actual cross-border movement. This informal sector, while substantial, remains largely unrecorded and operates outside traditional financial pipelines.
Traditional remittance systems often involve intermediaries that extract margins at various stages. In contrast, the peer-to-peer model functions more like a marketplace, deepening liquidity and speeding up matching as more participants join and more corridors open. This system optimizes through network effects rather than solely through infrastructure investment.
For Nigeria, where remittances can rival foreign direct investment, the distinction between formal and informal channels is crucial. Traditional channels for Africa-bound transfers typically incur costs between 6% and 8%. Peer-to-peer models, where users negotiate rates directly, foster a more competitive environment, reducing these margins and retaining more value within household economies.
The regulatory landscape for these informal flows is evolving. While historically difficult to track, advances in digital identity, real-time payment rails, and compliance tools are making it increasingly feasible to structure these transactions efficiently and transparently.
