CURRENCY VALUE: The New African Payment System introduced by the banking industry may likely Crash Down the Value of Local Currency transaction across Africa.
Our exclusive interview with financial experts proved that the basic idea of the system is to be able to settle trade between African countries without having to use the US dollar.
However, there are two major challenges with that as revealed by experts.
Firstly, intra-African trade accounts for less than 15% of Africa’s exports at present (although supporters of the African Continental Free Trade Area expect this to grow significantly over the coming decades).
The African payment system therefore does not eliminate the role of the dollar (or other foreign currencies) in trade settlement entirely.
The second issue is that trade is not balanced between African countries. Since trade rarely occurs instantaneously, some institution in the trade financing chain carries the exchange rate risk.
Because of the gap between placing an order for imports and receiving them to sell in the local economy, there is a risk
that the value of local currency will change relative to the currency in which the import is denominated.
On this therefore, Africans are asking for the importance of this New New African Payment System which may likely crash-down transaction value in all the African states affected by this payment swap.
-Princely Onyenwe reporting
For inquiries on this news contact 9News Nigeria @08036856526
