Trade Agreements Alone Do Not Create Trade – BoG

By Praisebell Rosemond Larbi

Africa’s ambition to build a fully integrated $2.8 trillion single market under the African Continental Free Trade Area (AfCFTA) risks being undermined by costly, slow, and fragmented cross-border payment systems, the Bank of Ghana (BoG) has warned, stressing that trade agreements alone cannot deliver economic integration without efficient payment infrastructure.

Speaking at the African Prosperity Dialogue in Accra on Thursday on behalf of Governor Dr. Johnson Pandit Asiama, the Second Deputy Governor of the Bank of Ghana, Matilda Asante-Asiedu, said the success of AfCFTA depends as much on payments architecture as it does on tariff reductions and trade protocols.

“Trade agreements alone do not create trade. Payments make trade possible, noting that without seamless mechanisms for transferring value across borders, Africa’s integration efforts will remain largely theoretical,” she said.

AfCFTA brings together a market of more than 1.5 billion people with a combined gross domestic product of about $2.8 trillion, making it the largest free trade area in the world by number of participating countries. However, BoG cautioned that structural bottlenecks in payments continue to limit the realisation of these gains.

According to the Bank, transaction costs for intra-African payments range between 7% and 10%, more than double the global average of about 3%, while settlement times often stretch into several days or even weeks. Compounding the problem, over 80% of payments between African countries are routed through correspondent banks outside the continent, typically in foreign currencies such as the US dollar or euro.

“These inefficiencies are not just technical inconveniences. They impose real economic costs on African businesses and economies. She noted that Africa loses an estimated $5.3 billion annually due to offshore payment routing and currency conversion costs, while exposing traders to foreign exchange risks and liquidity constraints,” Ms. Asante-Asiedu said.

The BoG highlighted the disproportionate impact on small and medium-sized enterprises (SMEs), women traders, and young entrepreneurs, who form the backbone of Africa’s informal, retail, and digital economies.

“High transaction costs and payment inefficiencies disproportionately affect these groups. Removing payment barriers will unlock scale, strengthen competitiveness, and expand opportunity across Africa,” she said.

Ghana, she noted, has invested heavily in domestic digital payment infrastructure, enabling real-time interoperability across banks, mobile money operators, and fintech platforms. This foundation is now being leveraged for regional integration through Ghana’s leadership role in the Pan-African Payment and Settlement System (PAPSS).

PAPSS allows cross-border transactions to be settled in local African currencies, reducing reliance on foreign banks, shortening payment chains, and lowering transaction costs for traders across the continent.

Looking ahead, Ms. Asante-Asiedu said Africa must deliberately transition toward local-currency settlement for intra-African trade, supported by African-owned infrastructure and institutions.

“African trade must increasingly be settled in African currencies, through African infrastructure, and supported by African institutions,” she stressed.

The Bank also pointed to complementary initiatives, including a fintech passporting framework with Rwanda, pilot programmes on digital public infrastructure and cross-border interoperability, and Ghana’s recently passed Virtual Asset Service Providers Act, aimed at regulating emerging digital payment channels while strengthening consumer protection.

She added that harmonising regulatory standards, particularly in KYC/AML, data sharing, consumer protection, and cybersecurity will be critical to making Africa’s single market functional.

“At the Bank of Ghana, we stand ready to collaborate with regulators, governments, and the private sector to ensure that payments become an enabler, not a barrier, to Africa’s economic integration,” she concluded. The BoG’s message underscores a growing shift across the continent: from focusing solely on trade policy to recognising payment systems as the backbone of real economic integration under AfCFTA.