Nigeria
Pan African Payment and Settlement Systems(PAPSS)
This is a central Financial Market Infrastructure (FMI) that supports payment arrangements for the purpose of expanding the international trade of African states, and to facilitate central bank’s economic and financial integration. PAPSS is currently live in the West African states Monetary Zone (WAMZ) in the following countries: Nigeria, the Gambia, Sierra Leone, Liberia, Ghana, and Guinea.
Some of the Benefits
Cheap
Reduction in costs associated with correspondent banking fees and central delays.
Easy
Enables client's to fully fund their trade obligations as against the current fragmented client’s FX purchase model.
Fast
Instant payment in local currencies.
Seamless
Removes the dependencies on third currencies and correspondent banking; facilitates intra-African trade.
How to Get It
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Transaction Process
- Client submits a PAPSS application request at the branch
- Due diligence is conducted on the application form.
- IBC authorizer checks for completeness and correctness
- CBN approval is obtained for the transaction.
- Client Naira account is debited for principal and related charges.
- The beneficiary receives payment in their local currency
- Customer received notification.
- Settlement is carried out in local currency.
What you Get
- Instant payment in local currencies.
- Guarantees the final settlement of the funds to the recipient participant.
- The beneficiary has immediate availability of funds.
- Removes the dependencies on third currencies and correspondent banking; facilitates intra-African trade.
- Drive the Africa Continental Free Trade Area agreement (AfCFTA) to yield growth in transactional activities (trade and payments) from corporates and retail clients.
- Reduction in costs associated with correspondent banking fees and central delays.
-
How to Get It
-
Transaction Process
-
What you Get
|
- Client submits a PAPSS application request at the branch
- Due diligence is conducted on the application form.
- IBC authorizer checks for completeness and correctness
- CBN approval is obtained for the transaction.
- Client Naira account is debited for principal and related charges.
- The beneficiary receives payment in their local currency
- Customer received notification.
- Settlement is carried out in local currency.
- Instant payment in local currencies.
- Guarantees the final settlement of the funds to the recipient participant.
- The beneficiary has immediate availability of funds.
- Removes the dependencies on third currencies and correspondent banking; facilitates intra-African trade.
- Drive the Africa Continental Free Trade Area agreement (AfCFTA) to yield growth in transactional activities (trade and payments) from corporates and retail clients.
- Reduction in costs associated with correspondent banking fees and central delays.
Frequently Asked Questions (FAQs)
To what extent CBN support USD settlement of transactions carried out by commercial banks knowing that local banks will deal in local currencies?
The payments from sending customer to beneficiary customer will be in local currencies while the intercountry settlement will be in USD between the central banks. For Nigeria, provided commercial banks complied with the provision of the CBN circular on PAPSS, the CBN will support the USD settlement.
Why are CBN (Sending and receiving) settling via FX (USD)?
The local currencies are not reserve currencies and therefore, the member central banks agree to use USD as the settlement currency.
Are trade backed transactions restricted to only physical goods importation or exportation?
Yes, for now only physical goods are being considered.
Is there any limit that can be transferred out of Nigeria?
The CBN has not placed a limit for payment for eligible goods imported or exported under PAPSS.
Since payment and receipt of funds will be in local currency, why must authorised dealers obtain CBN approval of USD cover before initiating transactions?
Since CBN will settle the ultimate position in USD, it is only fair that the CBN get some visibility in the process, hence the need for prior approval.
Who can deal in PAPSS trade? is it open to individual or strictly to corporate (exporters and SMEs)?
CBN settlement will be strictly for eligible transactions whether individuals or corporates.
Will there be any sanctions from CBN if it is discovered that payments made on PAPSS are not trade related?
Yes, there will be sanctions for breaches.
Are there provisions for border controls enhancement to support logistics for physical goods exchange between participating countries?
While any measures towards improving trade facilitation are welcome and will be supported, PAPSS will run on the existing system or procedure or processes. No change would be made just because of PAPSS.
Are the validations done automatically? And does this mean PAPSS will be integrated with all payment settlement systems in different countries?
Yes – validation is done automatically. Yes – PAPSS will be integrated to national and regional payments systems and switches. PAPSS can support the upgrade of outdated payment systems.
Based on submission from CBN, does that mean that for every transaction done on PAPSS, there must be an approval?
Yes, for every transaction, there must be an approval. The request for approval should be per individual transaction not bulk.
How Fast can beneficiary receive funds using PAPSS (subject to CBN approval)?
Transactions are T+1 and flow through NIBSS which has a 12pm clearing session. Receipt time is 24hrs from when the transaction passes the NIBSS clearing session.
Will the CBN approval form part of the 120 seconds meant for the settlement?
The approval is not part of the 120 seconds. The 120 seconds is the cycle for successfully initiated and approved transactions on PAPSS to be received by the beneficiary. The request for approval and CBN response should be sent via letter.
What currency should be used for export process certification? Since export proceeds are received in local currency?
Certification will be in USD.
What import items qualify for payment under PAPSS?
Import payments are restricted to goods of African origin
What is the turnaround time for pre-approval from CBN?
Turnaround time is dependent on CBN Management approval
What or which currency will be quoted on the proforma invoice as the basis for the contract of sales?
The USD or any of the specified currencies listed in Memorandum 3 of the Foreign Exchange Manual.
What will be the standard exchange rate? will CBN determine the exchange rate?
The cross-rates conversion between NGN and third-party currencies will be determined by the Central banks daily and updated on the PAPSS platform. The bank will advise the prevailing cross rate daily.
Will form M be opened in the local currency of the supplier’s country or USD?
The Form M for import and Form NXP for export will all be in USD or any of the specified currencies listed in Memorandum 3 of the Foreign Exchange Manual.
Will there be account name and number validation as part of the payment process?
Account number validation of the beneficiary is part of the payment process. In addition, before initiating a transaction, an account enquiry can be carried out.
Can current obligations on LCs (prior to PAPSS go Live) be settled via PAPSS? If yes, what are the conditions or under what circumstances can this take place?
This will be subject to CBN approval. All transactions processed through PAPSS need to be approved by the CBN. The Bank will deal this