In a major innovation that will drive trade among African countries and help various economies, the African Export-Import Bank (Afreximbank) said it has almost concluded the setting up of a pan-Africa payment and settlement platform that will finally dovetail into a common currency era on the continent.
The goal of the project is to facilitate payment for goods and services that are traded intra-regionally and to facilitate that in the different local commerces, Benedict Oramah, president of Afreximbank, said at a press conference at the bank’s ongoing 25th annual general meetings in Abuja.
“We have been engaged in a big project, the pan Africa payment and settlement platform which we are developing and I am pleased to say that we are nearing concluding that project.
“We are doing to it to bring convertibility within Africa of African currencies, that is the first important step to having a single currency and we are doing it by providing a clearing platform,” he said
The bank is in a unique position to champion the project since it is not regulated by any central bank and that all the countries and members of the bank have signed the treaty, which specifically gives the project a nod, he said.
“So, we have the legal basis, we have the convening power and we have the zeal to do it.”
What the platform will do is that for instance, somebody in Ghana buying goods in Nigeria will pay for input in Cedi, while the seller in Nigeria will receive naira, he said.
“Ultimately, when we clear everything, only those who are in deficit would then be called upon to pay in dollars, however, as we do this across 54-55 countries in Africa, we’ll start to create a notional currency which would be built around the African Export-Import bank.”
Explaining the modalities further, he said this is because in the trade between Ghana and Nigeria, for instance, Ghana may be in deficit, but may be in surplus in the trade between it and say, Sierra Leone, “so we hold those in that notional currency which they can lend, and they can transfer to use to pay where they are in deficit.
“From a multilateral angle, you may then find that the use of a foreign currency will trend towards zero.”
Oramah said that if “this works according to their optimism and people get use to it, “it then forms the basis for the activities to be in place for a single currency to be there, the issues of macroeconomic convergence, they can then have a luxury of discussing them knowing that in principle, you are already trading using one currency.
“That is our hope, and we are working very hard towards it,” the President added.
Oramah also announced the Afrexim bank’s five years intra African trade strategy which hinges on three key pillars, including create, connect, deliver and which the bank started implementing in January.
According to him, the strategy projects that by the end on five years, the bank would have disbursed $25 billion, having done $8billion already in the first year, well ahead of target.
He said the strategy targets trade financing in food, oil sectors among others across Africa, as well as various logistics to support trade.
Oramah also announced that in 25 years of existence, the bank has disbursed $50 billion to member countries for various developmental needs and exceeded expectations as well.
According to him, the bank’s funds helped Africa remain resilient during the global financial crisis, though some of the countries still remain in difficulty.
By 2017, all, but $1.5 billion of the loans granted to member countries were yet to be repaid, he added.