With PAPSS, a major instrument under ACFTA, Africa is now opened for business – COO, Ecobank Transnational, Dr Bajomo

Dr. Bunmi Bajomo is the Head Group Corporate Banking and Chief Operating Officer, Corporate and Investment Bank Ecobank Transnational. She covers Corporate Banking in Africa and the Financial aspects of it which comprises dealing with Corporate Finance and international organisations, government and public sectors as well as multinationals, regional and the world generally.

In this interview with the Publisher/Editor-in-Chief, Dr Samuel Ibiyemi, the Global Financial Expert speaks on her roles regarding business expansion globally in Ecobank Group and the roles of African Continental Free Trade Agreement (ACFTA) in the promotion of ease of doing business to eliminate currency disparity without the use of Dollar, Euro or Pound in line with the Pan-African Payment and Settlement System (PAPSS) – a brainchild of the Afrexim Bank. Excerpts:

What is your view on the economy of African Countries?

I think Africa, just like the rest of the world, is now open for business. This is crucial in the aftermath of the COVID-19 crisis and the resulting shocks from the ongoing Russian-Ukraine crises. Like we said at the Chartered Institute of Bankers of Nigeria (CIBN) conference, a major objective of ACFTA was to lift 30 million people out of extreme poverty (people earning less than $1.9 a day) and another 68 million people out of moderate poverty (earning less than $5.50 cent a day). That was the focus and everything was in top gear towards actualising that dream over a 15-year period between 2020-2035. If you remember, the World Bank study also postulated that if we implement ACFTA holistically, we would, beside lifting people out of poverty, grow Africa’s export to about $560billion as well as generate net income gains of about $450billion. Of those net income gain about 64 per cent or $292billion will actually come from government of African countries putting measures that help make intra-African trade seamless and easier, the so called trade facilitation measures. Like I earlier mentioned, African countries don’t trade significantly among themselves; the total intra Africa’s trade up till 2015 (which was the peak) was about 18 per cent and thereafter we are down between 12 to 15 per cent. But what has happened with COVID which nobody foresaw? While ACFTA wanted to deliver 30 million people out of extreme poverty over a 15-year period, between 2020-2021, the COVID-19 pandemic actually threw 30 million people equivalent into extreme poverty and by 2021, additional 9 million people also joined that extreme poverty circle. So what ACFTA was to deliver in 15 years, the COVID crises reversed in 2 years.  Imagine what situation we then have now with current geo-political tensions, spiraling inflation and balance of payment/budgetary crises across African economies.

Despite all of these, what has been observed is that Africans are very suspicious of one another. We have issues surrounding border control and prohibitive measures that don’t actually allow people to venture into saying “I want to go to Ghana or Gambia or Senegal to set up business.” Even for people that have set up, we all know this occasional fight between Nigerian traders and the Ghanaian authority. In some countries, you can’t own a business except there’s an indigene collaborating with you. So, what we are telling Africans now is that ACFTA has already provided measures for 97 per cent of these tariffs to be removed. Over the first five years, ACFTA would expect that 90 per cent of these tariffs would have gone and over the next five years which means cumulative 10 years, another 7 per cent. ACFTA says if the countries are so much in love with tariffs, about 3 per cent of the tariff would be left for governments to do whatever they want to do with it. However, with a caveat, that whatever that 3 per cent will constitute in the future will not be more than that 10 per cent of intra-Africa import. This figure in 2020-2021 was actually about $69 to $70billion. It means that government has about $7million to play with in terms of tariff; but if they are not trading among themselves, what is the purpose of putting the tariff anyway? That’s why the ACFTA-World bank study is saying it will only deliver 0.2 per cent of the benefits. What African countries should focus on are the things that helped them to reduce their trade cost, lower barriers and facilitate trade. What kind of hard and soft infrastructures are they providing on the table? What are the compliance and control measures being put in place that make the country attractive for business? What are the things that are the enabling environment that allow African countries to trade among themselves? These are the things ACFTA is saying we should focus on, and like I mentioned, we always think ACFTA is fully dependent on Nigeria because we have about 200 million population. Yes, we may have the population, but what are we doing with bulk of that population? If we do not harness that population to the nation’s advantage and don’t put in place those hard and soft infrastructures which will deliver 64 per cent benefits, then we will not get any benefits. However, there are other nations across the African continent doing a lot of wonderful things, positioning themselves for ACFTA . So, if ACFTA is saying I want to boost African economy or lead to economic growth by fostering integration among African nations, how do you foster the integration? How do you see the benefits of that integration? If you want to see the benefits of that integration, look at what Ghana has done. Before now, if you look at the cocoa industry between Ghana and Cote d’Ivoire, they control about 65 per cent of total cocoa export. However, they export this primary cocoa to Netherlands and the likes of Switzerland for them to process. Some years back, the total export of cocoa product out of Ghana was about $1.4billion. By the time Netherland added value, they leveraged their own value chain process, the total value of export out of the Netherlands was actually $4.5billion.

For the resulting hard work of African farmers, $100 billion is the estimated net gain for the cocoa industry. Of this $100 billion proceed, how much is coming to Africa the originator of the cocoa industry? At the peak, it was six per cent coming to Africa which is about $6billion. So, for all these poor farmers, how do you lift all of them out of poverty? The government of Ghana in conjunction with that of Cote d’Ivoire took their destinies in their hands.  Ghana established Cocoa Board while Cote d’Ivoire established Cocoa and Commodity Council (CCC) of Cote d’Ivoire. Both countries agreed and took a decision that any Cocoa that is going out of the region, they will not sell for a premium that is less than $400 per ton. It implies that is the lowest price Netherlands and other importers will buy cocoa from the region. Because of that decision, the world market for cocoa took notice, of the emergence of a form of cartel or mini OPEC in cocoa. They agreed to have price control over the resources that are coming from both nations, thereby taking charge that they are not going to sell for cheap. So, if you add the products of Ghana, Cote d’Ivoire, Nigeria and Cameroon the other cocoa producers, they are actually controlling 75 per cent of primary source of cocoa material.

Then, in terms of infrastructural gap, we’re saying that the total gap in trade finance is $82billion. In terms of core infrastructures, the total infrastructural need is between $130billion to $170billion. Infrastructural gap is identified between 53 to 68 per cent. At the peak of 68 per cent, the total infrastructural would be about $108billion. How do we finance that? If you look at the African Economy, we actually have total assets under management of about a $100billion sitting with various multinational institutions or Development Finance Institutions (DFI) earning less to nothing. What will you earn on your deposit abroad which is less than one per cent? So, we are saying why is Africa having to borrow at a premium. This implies that for being Zimbabwe, Nigeria or Sierra Leone, if any of these countries in Africa want to borrow, the DFIs will add a premium of certain percent for being judged as a risk. Whereas every other nation in the world might not pay this risk premium. A nation in Asia will not pay but DFIs are insisting that the risk premium would will be added to the loan of African countries, despite taking custody of $100billion Africa’s assets. Why are they doing that or adding it? It is because each nation is going individually to negotiate trades with DFIs. So, what ACFTA is saying is that why must we do it this way instead of coming together as a collective body and stand in unity that we want to borrow as Africa. I am keeping a deposit equivalent of $100billion with you, I need $100billion and what are you going to do for me? Thus ACFTA objective is to enable African countries to borrow cheaply based on improved risk rating. So, this is what ACFTA is trying to do – to boost trade. However,  if there’s no platform for people to make payment and settle trade, then how would our trade evolve?

So, we  are saying we need a payment infrastructure that delivers value and helps us to facilitate trade. That is where the Pan African Payment and Settlement System (PAPSS) comes into  play. That is why for our panel session during the CIBN conference, it was actually in collaboration with PAPSS, so that, as we are talking trade, we are also talking about the payment system that will allow me to sit in Nigeria and order products from South Africa without me having to worry whether I will need to get South Africa Rand or not. So, I’m saying I have Naira and I want to buy air ticket out of Lome: so, debit my Naira account and get your SOFA and that’s what PAPSS is doing. As a trader in Nigeria over a two minutes period and not more than minutes, you will have an instantaneous payment for all goods that you’re importing from another region, as far as it is within Africa. If you then choose on your own premise to look for Dollars, that you must use Dollars, then you know it’s because you want it not because it’s by compulsion. So, we want to eradicate intermediating currency and intermediating nations. We want to focus on Africa and deliver the benefits of PAPSS in terms of trade and boost trade and regional development.

Is the Pan African Payment and Settlement System (PAPSS) under the control of government or private sector?

The PAPSS is being sponsored by Afrexim Bank in conjunction with AfCFTA Secretariat which is chaired by Mr. Wamkele Mene. So, it’s a collaboration and Nigeria is heavily involved. Based on the setup of PAPSS, the Chairman is actually our Central Bank Governor, Godwin Emefiele by virtue of the fact that Nigeria is occupying that position. And that’s why they appointed another Managing Director who is also a Nigerian, Mr. Mike Ogbalu even though Afrexim is operating out of Egypt.

What has been the response of other African countries and how many countries have been captured by PAPSS?

In terms of the response of other countries, what we have done is that with effect from September 2021, we had a pilot stage within West Africa. West Africa was deliberately chosen because it’s a macro country for the rest of Africa. West Africa comprises anglophone and francophone countries, that is we have English speaking countries and French speaking countries. It has the largest market in Africa including Nigeria. It has a lot of similar ones as well. It’s actually quite developed in terms of payment infrastructures and in terms of  marketing.  So, for anything that will go wrong in this zone, when it is fixed or corrected, the chances are that when you plug it to the Southern and East African regions it will be fine. That’s why it’s being piloted here. So, eight Central Banks are now plugged on this network. You have Liberia, Ghana, Nigeria and others. And the way it is used is that they don’t want to rejig the architecture but use what is already available. Like in Nigeria, we have the Nigerian Interbank Settlement Scheme (NIBSS). All of the architectures are built around the NIBSS platforms. We are doing Real Time Gross (RTG) settlement in Nigeria right now through the NIBSS platform and what they have done is that anything you are doing in your zone bring it and plug it into the PAPSS platform. By being a member of NIBSS, as a financial institution in any of these countries, you are an automatic member of this system in Nigeria, Ghana, Liberia. Now, it has been moved beyond these countries, we have Rwanda and Kenya signing into it. The objective is that by the end of 2023, all of the five regions remaining – the Southern, French zones, East Africa Development Authority and South Africa Development Authority – would have been plugged onto the network. By 2024, all of the Central Banks across Africa would have plugged onto it and by 2025 all of the commercial banks would have plugged onto it. As of now, about 28 commercial banks are already on the platform. You see what I was saying during the conference is that regardless of the size of the bank, whether small or big, once plugged into the platform, customers of the bank will enjoy PAPSS. For instance, let me use my bank: I work for Ecobank Transnational Inc. If you are in Ecobank Bank Group, once Ecobank plugged into the system, you are automatically connected into it. What we need to do is that we are not reinventing any App, but plug all our customers in Ecobank network  into the PAPSS. Like using my Ecobank Lome card, I have been everywhere in Africa. All I need is not to be carrying Dollars around, but use my card to travel to Senegal, pay for my hotel and they debit me. If I come to Nigeria, I will use my SOFA card to pay for my hotel and it gets debited in Naira. So, why should I need dollars? So, it’s not only you. When my son was going to South Africa in August, all I needed to do was to get an Express card for him linked to my account. Of course and I moved some of my SOFA there and he was able to spend it in South Africa. From there he moved to London and he continued using the card. Imagine when you can plug that into a switch and within the comfort of your own computer, you are transferring money. That is fantastic.

What is the advantage of this system over common currency proposed few years ago by ECOWAS? 

In terms of common currency just like the Euro zone currency, it is something people protect – like it’s a national pride and symbol. It is like they taught us in school, the Coat of Arm,  currencies are those things that belong to specific countries. For your own, why can’t you start from things that are easy? If you say Africans out of the Francophone countries are already using the SOFA which is benchmarked against the Euro, that is just like in disguise a monetary zone. So, everybody is using SOFA; all of these ethnogenetics are actually in West Africa where you have Ghanaian Cedi, Nigeria’s Naira and those Southern Africa countries where you have the Rands, Shelling and  those other currencies. So, leave the currencies because what we’re trying to do seems to me like a bypass. Hold your currency like the British have held the Pound Sterling, but let us create a common platform where we will later de-emphasize local currencies.

Is there fraud with you when you do transactions from your phone now?

See, there will always be people who will test the system but it will continue to evolve. So, you will always experience those things since they also happen in advanced countries. Focus on yourself. Protect yourself and don’t release your PIN to anybody, and then you do your transactions where you know you are safe and secured on your laptop, or desktop. As far as you have taken this control, when you have infusion is where there is a breach somewhere – maybe you released your PIN or somebody has gotten hold of your card. And let me tell you, with advancement of technology over time, people will continue to try on it but for the rudimentary ones you will need to re-examine yourself – like did somebody access my ATM card today or come in contact with my pin and wants to withdraw money? Those ATMs actually have recording devices and it has happened to me before that somebody was withdrawing from my account and I quickly called the bank and they stopped it. I wanted to know who and I was surprised that this bank brought to me a picture of somebody at the point of withdrawal and I was amazed. This was about six years ago, I was in a car and going for customer’s call when I left my handbag in the car. Then, the driver that was driving me at that time was smart enough to know that this woman has left her bag in the car. In those days,  banks used to give your PIN on a paper because you cannot memorize it. So, I kept my pin in the side pocket. He took the pin and wrote it but he didn’t do the transaction immediately. I had trusted him because he had driven me for so long. The day they brought his picture, I was shocked and that is where technology was six years ago.

What has been the response of small countries to the development and the equity of PAPSS between Afrexim Bank, CBN and that of other countries? This kind of arrangement can also lead to profit sharing? 

I don’t think it’s about profit sharing right now because it has not taken off. The first is let us integrate the payment systems to get Africa working and that’s why it’s in conjunction with Sovereigns through the Central Banks and the ECOWAS Secretariat.  54 countries signed up to AfCFTA are by this membership signed up to the 5 instruments one of which is anchored by the PAPSS network. Therefore, by signing up there is an instrument of ratification which each  must drop. Once you have done that you’re already a part to this. So, the process is already taken care of and the objective is to get Africa payment systems working. You know that even if you’re a small country and somebody is saying I want to start buying from you. Anything that facilitates your receiving money quickly as against waiting for somebody for three weeks or somebody to fly from Lagos to Guinea Bissau, why resist it? Nobody is saying bring anything, we’re just saying utilize this technological platform as another way of doing business.

How can African Leaders make our currencies stronger generally, for instance Naira is going for over N600 against the Dollar?

I am only bound by the official rates advised by the Regulator. The truth is that because of the COVID-19 crisis, nations were concerned with providing stimulus, to support citizens. People could not go out, so, a lot of countries went out borrowing. Even at  that, compared to what was spent by the developed world, the less developed countries only constituted 2 per cent of the total stimulus spent. At one point in the few weeks after COVID’s emergence, it was a $10.6trillion Stimulus economy. You have Canada, the US leading the pack. Within two months of COVID, the stimulus was already $10.6 trillion. So, what we are now saying is that we know this is a problem. We were in a bubble because the level of interest was so low. If you look at it, what was the cost of borrowing at the time? Next to nothing. So you stack up on debt. It was painless to borrow then. Now, the developed countries are jacking up rates. When did you hear that US increase rates by 0.75 percent in a single day? But this is the focus across board now. What can you do to strengthen your currency? Each nation has its own  balance of  payment crisis now in Africa.  But what we are saying is that at least put all the enabling measures in place because of the current situation. What everybody does is to look for Dollar because you want to buy items between yourself and Ghana. We’re saying let us reduce the pressure. Anything that does not need to involve Dollar, Pound or Euro or other intermediating currencies, can we take them off the demand equation? If we are saying Africans do not trade among themselves. In Europe they trade almost 69 per cent among themselves. In the Americas, it is 55 per cent, Asia is almost 60per cent, and Africa is currently doing between 12-14 per cent. ACFTA is saying if you do all of these, Africa’s  export trade will increase by 24 per cent and intra Africa trade will grow by 81 per cent. So, why can’t we do everything that will help this intra Africa trade to grow? You talk in terms of FDI, ACFTA is saying, in fact the recent report released by the World Bank in June was that if all the integration ACFTA promise under the six protocols are followed, then under a broad ACFTA case scenario, then export will increase by 111per cent. Under a deep ACFTA case, it would improve further to 159 per cent, if we even now implement all of the 5 instruments and 6 protocols, export will now improve by 159 per cent. If export is increasing, it means  you are increasing your productive base. The foreign direct investment  (FDI) from that experience under a broad scenario 111 percent and under a deep scenario 159 per cent. So, if ACFTA is saying if you do ABC, FDI will flow, it now behooves on Nigeria to put in place ease of doing business and make the environment conducive. Our problem is not just inflation but there’s a cost push element because it’s not that there’s so much money that everybody is now running after what they shouldn’t buy. No, the contrary is actually the case.  Things are quite tight now, disposable income has reduced, taxes have gone up  Despite that, there is  exchange rate pressure, insecurity pressure and the lack of raw materials due to constrained capacity that is making the prices of things to skyrocket. So, we’re saying  please ease the pressure. The  Government has increased the level of monetary policies rate to 14, for a long time we were  at 11.5. Ordinarily,  this should make investors to look at Nigeria and say Interest rate is going up. So, actually I don’t like these people but maybe we need to put some money there to take advantage of high interest rates. But you see what is happening with the airlines – what is the ease of repatriation of profit or even proceed of sales?. If there is no certainty around repayment or repatriation of proceed of sales, then it becomes an issue. It means that irrespective of where you take your interest rate, people will actually decide not to come into the economy. But what we need to do is to signal rightly.  If investors only read of probes after sales of assets to resident or non-resident investors, that would discourage investors. Rather than probes after facts,  requisite due diligence should happen before settlements. Personally, I would say that’s not the right approach. I believe given our BPE experience, requisite due diligence should have been done. I believe if Government is selling something or a foreign investor is saying I want to divest from this economy by going away;  would you rather prefer someone that is resident in Nigeria who has made his money in Nigeria, then wants to renew his confidence by saying this asset or private entity that someone wants to sell in Nigeria, I am interested in it. Or would you prefer to have somebody from abroad that doesn’t have interest in Nigeria and does not believe in Nigeria. Just another venture capitalist saying I want to make profit,  let me go and buy this asset for five years, then I will sell it off, which would you prefer? But if people have made their money from Nigeria and they wish to further invest in Nigeria and you are now coming and saying where did they get their money from?? You know that mutual suspicion that African countries have among themselves, are we not unconsciously displaying biases if we signal that except you are of certain pedigree that because we don’t believe they can afford it? So, if you do that to one, what is the incentive for somebody else looking at another asset that Government wants to sell tomorrow and say “I want to buy”  After seeing how previous sales of assets have turned out, they might say, you know what, don’t touch them, I’ll rather not buy. So, we have to  be sure of what we are signaling because if we don’t signal what is right, we won’t get what we want. We have wealthy Nigerians all over, so motivate them to return and invest. The same way we value diaspora remittances, we want to attract diaspora and domestic investors. CBN has a lot of initiatives in place and you can earn N65 on every dollar, and if you’re an existing player and it’s your own export proceeds, you can earn also. All we need is positive signal so that people will feel encouraged to invest in Nigeria.