Dr. Ernest Addison, Governor of the Bank of Ghana (BoG), has stated that Ghana has a significant role to play in the integration of the financial system of ECOWAS.
According to him, this process includes: capital market integration; regional currency convertibility/quoting and trading national currencies; harmonization of the legal and regulatory frameworks of the banking sector; harmonization of legislations; and cross-border payments system integration.
Dr. Ernest Addison said the implementation of these reforms would ensure the development of a robust financial sector in Ghana to participate in funding trade transactions presented through the AfCFTA platform.
“Ghana’s financial sector can play a pivotal role in leveraging AfCFTA to boost the country’s socio-economic development. This can be achieved through investments in infrastructure and financial technology to support regional trade transactions. These favourable conditions and Ghana’s position as the gateway to West Africa, among other factors, earned Ghana the rights to host the AfCFTA Secretariat”.
Dr. Ernest Addison
Speaking at the ‘The Ghana Trade Roadshow’ at the Marriott Hotel in Accra, the Governor indicated that Ghana’s banking sector is currently well-capitalized, with adequate liquidity to support transactions generated through increased trade.
He noted that the Bank has also put in place robust regulatory and supervisory frameworks to support in-country and 6 cross-border trade transactions. There are also policies and safeguards to reduce Anti-Money Laundering and Combating the Financing of Terrorism (AML-CFT) activities and create a robust and a sound financial system to support regional trade.
“Ghana’s financial sector can therefore, be instrumental in meeting the funding needs of businesses in the country to trade under the AfCFTA umbrella”.
Dr. Ernest Addison
Africa Continental Free Trade Area
Officially launched in 2021, Africa Continental Free Trade Area (AfCFTA) is one of the flagship projects of the African Union’s “Agenda 2063: The Africa We Want”, which aims to promote trade among 55 African countries, with a market size of about 1.2 billion people and projected US$450 billion income boost for the continent by 2035.
The main objective of AfCFTA is to create a single market for goods and services and promote the free movement of business persons and investments in Africa. The Agreement seeks to expand intra-African trade through better harmonization and coordination of trade liberalization and facilitation regimes. Trade remains an important driver for economic growth and development in Africa.
Intra-African trade has increased in recent years; nevertheless, Asia and Europe remain the main trade partners of the continent. High dependence on trade in primary goods, high product and market concentration of 3 exports, and weak regional production networks are among the main challenges of trade on the African continent.
The trade constraints in Africa are partly linked to small, fractured, and partially-isolated markets. The effective implementation of AfCFTA would therefore, be a giant step forward and the Agreement demonstrates Africa’s readiness to integrate into the global trade agenda.
To play a relevant role in this space, the continent must strategically position itself to take advantage of the opportunities AfCFTA presents and “This would require commitment from all countries and all stakeholders”, Dr. Addison said.
The Africa Trade roadshow series, Dr. Addison said, came at an opportune time to help facilitate and create the enabling environment for trade for all stakeholders in the trade industry in Ghana.
African integration and development is anchored on financial sector development and access to finance and investment. In addition to the fragmented markets, inadequate payment systems infrastructure has been identified as a major constraint to intra-African trade.
MANSA and the PAPSS platforms to facilitate financial transactions
Payments within Africa are mostly done through correspondent banks before reaching the recipient African neighbor. This comes with high transaction fees, compliance costs, applied foreign exchange conversion rates, and liquidity costs.
Thankfully, the Governor said with the introduction of the MANSA and the PAPSS platforms, financial transactions within Africa are likely to receive a boost.
Afreximbank’s MANSA platform is intended to provide secure and trustworthy means for proper verification of counterparties and due diligence, one of the main challenges facing intra-African trade today. The PAPSS platform will give businesses in Ghana access to the entire African continent and enable them to engage in financial transactions in local currencies.
In response to the opportunities that the AfCFTA presents, Dr. Addison urged all commercial banks to strengthen all risk management systems and scale-up capacity in trade finance to support the private sector.
He also encouraged banks and non-bank financial institutions to increase investments in digitization platforms as well as cyber-security systems to facilitate safe and secure trade transactions through AfCFTA. These institutional developments should complement the PAPSS and MANSA platforms through which Afreximbank will work with local businesses and financial institutions to help facilitate intra-Africa trade.
Dr. Addison also encouraged all financial institutions to collaborate and take advantage of the opportunities offered through AfCFTA to boost the country’s trade efforts.
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