ADDIS ABABA, Ethiopia – Ethiopia has joined the Pan-African Payment and Settlement System (PAPSS), opening a new route for businesses to make cross-border payments in African currencies. The move could reduce transaction costs, ease trade with neighbouring economies and strengthen the country’s links to the wider African market.
The National Bank of Ethiopia and PAPSS announced the agreement on Thursday, 15 October, in Addis Ababa. It marks another step in Ethiopia’s efforts to modernise its financial sector and expand economic cooperation across the continent.
The system allows participating financial institutions to process cross-border payments using local currencies. This reduces the need to convert payments into US dollars before transferring money between African countries. It also offers an alternative to routing transactions through correspondent banks outside the continent.
For Ethiopian businesses, the development could make it easier to pay suppliers and receive payments from customers in other African markets. Importers, exporters and smaller enterprises could benefit from simpler transactions as local banks connect to the network.
However, the central bank’s membership does not mean every Ethiopian business can immediately use the service. Commercial banks must establish the necessary connections and introduce payment services before customers can benefit directly.
National Bank of Ethiopia Governor Eyob Tekalign welcomed the agreement as part of the country’s financial modernisation programme.
“Ethiopia’s integration into the PAPSS network represents an important step in our continued efforts to modernise our financial system and deepen our economic connections with the rest of Africa,” he said.
Ethiopia’s participation comes as African governments seek to address one of the longstanding barriers to trade within the continent: the cost and complexity of moving money across borders.
Businesses trading between African countries often rely on international banking arrangements that involve foreign currencies and intermediary institutions. These transactions can introduce additional charges, delays and exchange-rate risks, particularly for smaller companies operating with limited financial resources.
PAPSS seeks to simplify this process by allowing participating banks to handle payments through a common African network. The platform supports transactions in local currencies while providing the infrastructure needed for cross-border settlement.
The system launched commercially in January 2022 with 10 commercial banks. It now operates across more than 15 African countries and connects over 150 commercial banks, according to figures reported this week.
Countries participating in the network include Nigeria, Kenya, Zambia, Malawi and Tunisia. South Africa, one of the continent’s largest economies, has yet to join.
Ethiopia’s entry is significant because the country has been pursuing reforms to improve access to foreign currency and strengthen its financial system. Businesses have faced difficulties obtaining foreign exchange for imports and international payments, making efficient payment infrastructure an important part of economic reform.
Joining PAPSS could help Ethiopian companies conduct more trade with African partners without relying on the dollar for every transaction. However, it will not automatically resolve foreign currency shortages or remove the financial and regulatory barriers that businesses face.
The effectiveness of the system will depend on bank participation, access to local-currency liquidity and the willingness of businesses to adopt the new payment channels.
The agreement also supports the objectives of the African Continental Free Trade Area (AfCFTA), which aims to create a more integrated African market by reducing barriers to trade.
Although tariff reductions and improved transport links remain important, businesses also need reliable ways to receive and transfer money. Without efficient payment systems, companies may struggle to take advantage of new opportunities across African borders.
PAPSS forms part of a wider effort to build financial infrastructure that supports trade within the continent. The initiative operates under the framework of the African Export-Import Bank (Afreximbank), the African Union and the AfCFTA Secretariat.
Ethiopia’s membership adds another major African economy to that network. It could also strengthen payment connections between East Africa and other regions, particularly as more financial institutions join the platform.
The announcement coincided with preparations for the second edition of COWRY, a conference focused on global and regional payment systems. Addis Ababa will host the event, bringing together financial institutions, regulators and payment industry participants.
While the agreement represents progress towards greater financial integration, its commercial impact will depend on implementation. Ethiopian banks must translate the central bank’s participation into services that businesses can use at competitive prices.
The development nevertheless reflects a broader shift in African trade policy. Governments and financial institutions increasingly recognise that moving goods across borders is only part of the challenge. Businesses also need affordable and dependable ways to move money.
Ethiopia’s next test will be how quickly its financial institutions connect to PAPSS and whether those connections produce measurable savings for businesses trading across the continent.
