From Finance to Food: How Africa's Payment Revolution Is Lowering Prices on Your Plate
The Grain and the Ledger: How Africa’s New Payment System Could Ease the Pain of Rising Food Prices
African Proverb: “When the roots are deep, there is no reason to fear the wind.”
For decades, the winds of global commodity markets, currency fluctuations, and logistical tangles have buffeted Africa’s food security. A loaf of bread in Nairobi or a bag of maize in Lagos is priced not just by local harvests, but by a complex web of dollar-denominated trades, costly cross-border delays, and hidden fees. But a quiet financial revolution, rooted in pan-African cooperation, is growing stronger—and it promises to bring stability to the continent’s dinner tables.
The Problem: Why a Tomato is More Expensive Across a Border
Imagine a Nigerian trader trying to buy rice from Senegal. The transaction is a financial odyssey:
1. The Nigerian Naira must be converted to US Dollars, incurring a forex fee.
2. Dollars are sent via correspondent banks (often in New York or London), taking 3-5 days and more fees.
3. In Senegal, dollars are converted to West African CFA Francs, again losing value to exchange margins.
4. This 8-10% total cost is baked into the price of the rice. The delays mean the trader must stockpile less, risking shortages. This system, reliant on a foreign currency, makes African food trade inefficient, expensive, and vulnerable.
The Solution: PAPSS – The Swift for African Trade
Enter the Pan-African Payment and Settlement System (PAPSS). Launched by the Afreximbank and endorsed by the African Union, it’s a simple yet radical idea: let Africans trade in their own currencies.
Think of it as a direct messaging and settlement highway between African central banks. When our Nigerian trader buys Senegalese rice, PAPSS instantly converts Naira to CFA francs at a pre-agreed rate and settles the payment within 24 hours. No dollars. No long detours through foreign financial hubs. The cost plummets to an estimated 2-3%.
From Finance to Food: Lowering the Cost of the Basket
This technical shift has direct, tangible impacts on food prices:
1. Cutting the Logistics Tax: The savings on transaction fees directly reduce the final cost of imported staples like wheat, rice, and powdered milk.
2. Boosting Regional Trade: Faster, cheaper payments make it viable for a Kenyan company to source beans from Ethiopia instead of Brazil, keeping value within Africa. It incentivizes trade within regions with food surpluses (e.g., Tanzanian maize to Kenya).
3. Stabilizing Supply: Swift payments mean faster movement of goods. Traders can respond to local shortages in real-time, smoothing out price spikes caused by delays. This builds resilience against external shocks, like the one caused by the Ukraine war, which severely disrupted grain imports.
The Politics: Sovereignty on the Plate
This isn’t just economics; it’s high-stakes political strategy.
· Monetary Sovereignty: PAPSS is a tool to reduce dollar dependency, a key pillar of Western financial influence. By creating a native system, Africa gains more control over its economic destiny.
· The AfCFTA Engine: PAPSS is the financial nervous system for the African Continental Free Trade Area (AfCFTA). Without it, the trade agreement is a car without an engine. Success here is a flagship political win for the AU.
· The Currency Debate: PAPSS is seen by many as a stepping stone to a future single African currency. It tests cooperation and trust between central banks. The politics of which currencies are included, and at what rates, are delicate. Nigeria’s prominent role via Afreximbank also signals a shift in continental financial leadership.
The Challenge Ahead
The roots of PAPSS are growing, but the wind remains. Adoption is key. Major commercial banks in the six pilot nations (including Nigeria, Ghana, Kenya) are onboarding. The political will from the AU is strong. But for the system to truly bring down food prices, it needs thousands of small and medium-sized agri-businesses—the true backbone of African food trade—to start using it.
Final Thought:
As the proverb reminds us,deep roots provide stability. PAPSS is an attempt to grow deeper financial roots for the continent. By untangling the costly web of cross-border payments, it does more than move money—it moves food more efficiently and affordably. In a continent where the average household spends over 40% of its income on food, that’s not just a financial innovation. It’s a tool for social stability, economic sovereignty, and putting a more affordable meal on every family’s table.
The ultimate goal? To ensure that the price of bread in Africa is determined by African farmers, traders, and markets—not by distant currency markets and intermediary banks. The journey has just begun.
